UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2016
OR
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
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Exact name of registrant as specified in its charter, principal office and address and telephone number
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State of incorporation or organization
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I.R.S. Employer Identification No.
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001-36867 |
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Allergan plc Clonshaugh Business and Technology Park Coolock, Dublin, D17 E400, Ireland (862) 261-7000 |
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Ireland |
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98-1114402 |
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001-36887 |
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Warner Chilcott Limited Cannon’s Court 22 |
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Bermuda |
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98-0496358 |
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Victoria Street |
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Hamilton HM 12 |
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Bermuda |
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(441) 295-2244 |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Allergan plc |
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YES x |
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NO ¨ |
Warner Chilcott Limited |
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YES x |
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NO ¨ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Allergan plc |
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YES x |
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NO ¨ |
Warner Chilcott Limited |
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YES x |
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NO ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Allergan plc |
Large accelerated filer |
x |
Accelerated filer |
¨ |
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Non-accelerated filer (Do not check if a smaller reporting company) |
¨ |
Smaller reporting company |
¨ |
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Warner Chilcott Limited |
Large accelerated filer |
¨ |
Accelerated filer |
¨ |
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Non-accelerated filer (Do not check if a smaller reporting company) |
x |
Smaller reporting company |
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Allergan plc |
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YES ¨ |
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NO x |
Warner Chilcott Limited |
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YES ¨ |
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NO x |
Number of shares of Allergan plc’s Ordinary Shares outstanding on May 2, 2016: 395,556,908. There is no trading market for securities of Warner Chilcott Limited, all of which are indirectly wholly owned by Allergan plc.
This Quarterly Report on Form 10-Q is a combined report being filed separately by two different registrants: Allergan plc and Warner Chilcott Limited. Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc. The information in this Quarterly Report on Form 10-Q is equally applicable to Allergan plc and Warner Chilcott Limited, except where otherwise indicated. Warner Chilcott Limited meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and, to the extent applicable, is therefore filing this form with a reduced disclosure format.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2016
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PAGE |
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Item 1. |
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3 |
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Consolidated Balance Sheets of Allergan plc as of March 31, 2016 and December 31, 2015 |
3 |
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4 |
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5 |
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6 |
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Consolidated Balance Sheets of Warner Chilcott Limited as of March 31, 2016 and December 31, 2015 |
7 |
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8 |
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9 |
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10 |
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11 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
72 |
Item 3. |
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93 |
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Item 4. |
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94 |
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Item 1. |
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96 |
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Item 1A. |
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96 |
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Item 2. |
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96 |
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Item 6. |
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96 |
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97 |
2
ALLERGAN PLC
(Unaudited; in millions, except par value)
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March 31, |
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December 31, |
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2016 |
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2015 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
2,260.8 |
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$ |
1,096.0 |
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Marketable securities |
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13.0 |
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9.3 |
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Accounts receivable, net |
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2,652.8 |
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2,401.6 |
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Inventories |
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1,022.2 |
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1,009.7 |
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Prepaid expenses and other current assets |
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634.3 |
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522.2 |
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Current assets held for sale |
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3,508.4 |
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3,540.3 |
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Total current assets |
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10,091.5 |
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8,579.1 |
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Property, plant and equipment, net |
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1,602.4 |
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1,573.9 |
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Investments and other assets |
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405.5 |
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417.9 |
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Non current assets held for sale |
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10,636.8 |
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10,541.3 |
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Deferred tax assets |
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77.7 |
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49.5 |
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Product rights and other intangibles |
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66,535.8 |
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67,931.7 |
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Goodwill |
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46,724.0 |
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46,551.5 |
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Total assets |
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$ |
136,073.7 |
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$ |
135,644.9 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
4,701.1 |
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$ |
4,349.5 |
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Income taxes payable |
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68.5 |
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54.2 |
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Current portion of long-term debt and capital leases |
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4,015.7 |
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2,396.5 |
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Current liabilities held for sale |
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1,410.2 |
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1,491.8 |
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Total current liabilities |
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10,195.5 |
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8,292.0 |
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Long-term debt and capital leases |
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38,551.8 |
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40,133.9 |
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Other long-term liabilities |
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1,024.0 |
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1,262.0 |
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Long-term liabilities held for sale |
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512.4 |
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580.1 |
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Other taxes payable |
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777.4 |
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801.9 |
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Deferred tax liabilities |
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7,563.9 |
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7,985.7 |
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Total liabilities |
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58,625.0 |
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59,055.6 |
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Commitments and contingencies (Refer to Note 20) |
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Equity: |
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Preferred shares, $0.0001 par value per share, 5.1 million shares authorized, 5.1 million and 5.1 million shares issued and outstanding, respectively |
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$ |
4,929.7 |
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$ |
4,929.7 |
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Ordinary shares; $0.0001 par value per share; 1,000.0 million shares authorized, 395.4 million and 394.5 million shares issued and outstanding, respectively |
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- |
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- |
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Additional paid-in capital |
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68,658.3 |
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68,508.3 |
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Retained earnings |
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3,833.6 |
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3,647.5 |
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Accumulated other comprehensive income / (loss) |
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28.4 |
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(494.1 |
) |
Total shareholders’ equity |
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77,450.0 |
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76,591.4 |
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Noncontrolling interest |
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(1.3 |
) |
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(2.1 |
) |
Total equity |
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77,448.7 |
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76,589.3 |
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Total liabilities and equity |
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$ |
136,073.7 |
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$ |
135,644.9 |
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See accompanying Notes to Consolidated Financial Statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
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Three Months Ended March 31, |
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2016 |
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2015 |
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Net revenues |
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$ |
3,795.9 |
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$ |
2,562.6 |
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Operating expenses: |
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Cost of sales (excludes amortization and impairment of acquired intangibles including product rights) |
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811.8 |
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1,020.1 |
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Research and development |
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403.1 |
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317.7 |
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Selling and marketing |
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795.8 |
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569.6 |
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General and administrative |
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342.6 |
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540.5 |
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Amortization |
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1,592.1 |
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787.8 |
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In-process research and development impairments |
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6.0 |
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- |
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Asset sales and impairments, net |
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(1.7 |
) |
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4.6 |
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Total operating expenses |
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3,949.7 |
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3,240.3 |
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Operating (loss) |
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(153.8 |
) |
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(677.7 |
) |
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Interest income |
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3.1 |
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1.8 |
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Interest expense |
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(332.8 |
) |
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(171.9 |
) |
Other (expense) income, net |
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0.5 |
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(197.9 |
) |
Total other income (expense), net |
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(329.2 |
) |
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(368.0 |
) |
(Loss) before income taxes and noncontrolling interest |
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(483.0 |
) |
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(1,045.7 |
) |
(Benefit) for income taxes |
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(402.0 |
) |
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(259.0 |
) |
Net (loss) from continuing operations, net of tax |
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(81.0 |
) |
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(786.7 |
) |
Income from discontinued operations, net of tax |
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337.4 |
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274.4 |
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Net income / (loss) |
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256.4 |
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(512.3 |
) |
(Income) /loss attributable to noncontrolling interest |
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(0.7 |
) |
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0.3 |
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Net income / (loss) attributable to shareholders |
|
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255.7 |
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(512.0 |
) |
Dividends on preferred shares |
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69.6 |
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|
23.2 |
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Net income / (loss) attributable to ordinary shareholders |
|
$ |
186.1 |
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$ |
(535.2 |
) |
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Income / (loss) per share attributable to ordinary shareholders - basic: |
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Continuing operations |
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$ |
(0.38 |
) |
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$ |
(2.80 |
) |
Discontinued operations |
|
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0.85 |
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|
0.95 |
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Net income / (loss) per share - basic |
|
$ |
0.47 |
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$ |
(1.85 |
) |
Income / (loss) per share attributable to ordinary shareholders - diluted: |
|
|
|
|
|
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Continuing operations |
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$ |
(0.38 |
) |
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$ |
(2.80 |
) |
Discontinued operations |
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|
0.85 |
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|
0.95 |
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Net income / (loss) per share - diluted |
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$ |
0.47 |
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$ |
(1.85 |
) |
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Weighted average shares outstanding: |
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Basic |
|
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394.8 |
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|
289.5 |
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Diluted |
|
|
394.8 |
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|
|
289.5 |
|
See accompanying Notes to Consolidated Financial Statements.
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME / (LOSS)
(Unaudited; in millions)
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Three Months Ended March 31, |
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2016 |
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2015 |
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Net income / (loss) |
|
$ |
256.4 |
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|
$ |
(512.3 |
) |
Other comprehensive income / (loss) |
|
|
|
|
|
|
|
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Foreign currency translation gains / (losses) |
|
|
542.8 |
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|
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(313.9 |
) |
Unrealized (losses), net of tax |
|
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(20.3 |
) |
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|
(4.0 |
) |
Reclassification for gains included in net income, net of tax |
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- |
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- |
|
Total other comprehensive income / (loss), net of tax |
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522.5 |
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|
|
(317.9 |
) |
Comprehensive income / (loss) |
|
|
778.9 |
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|
|
(830.2 |
) |
Comprehensive (income) / loss attributable to noncontrolling interest |
|
|
(0.7 |
) |
|
|
0.3 |
|
Comprehensive income / (loss) attributable to ordinary shareholders |
|
$ |
778.2 |
|
|
$ |
(829.9 |
) |
See accompanying Notes to Consolidated Financial Statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
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Three Months Ended March 31, |
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2016 |
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2015 |
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Cash Flows From Operating Activities: |
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Net income / (loss) |
|
$ |
256.4 |
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$ |
(512.3 |
) |
Reconciliation to net cash provided by operating activities: |
|
|
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Depreciation |
|
|
42.1 |
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|
57.2 |
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Amortization |
|
|
1,592.1 |
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|
925.4 |
|
Provision for inventory reserve |
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|
59.2 |
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|
30.3 |
|
Share-based compensation |
|
|
99.0 |
|
|
|
225.5 |
|
Deferred income tax benefit |
|
|
(519.2 |
) |
|
|
(304.3 |
) |
In-process research and development impairments |
|
|
6.0 |
|
|
|
3.7 |
|
(Gain) / loss on asset sales and impairments, net |
|
|
(1.7 |
) |
|
|
54.1 |
|
Amortization of inventory step-up |
|
|
42.4 |
|
|
|
212.9 |
|
Amortization of deferred financing costs |
|
|
10.0 |
|
|
|
268.3 |
|
Contingent consideration adjustments, including accretion |
|
|
33.6 |
|
|
|
28.8 |
|
Excess tax benefit from stock-based compensation |
|
|
(34.6 |
) |
|
|
(36.1 |
) |
Other, net |
|
|
(9.1 |
) |
|
|
(6.5 |
) |
Changes in assets and liabilities (net of effects of acquisitions): |
|
|
|
|
|
|
|
|
Decrease / (increase) in accounts receivable, net |
|
|
(148.6 |
) |
|
|
(702.1 |
) |
Decrease / (increase) in inventories |
|
|
(148.5 |
) |
|
|
(202.7 |
) |
Decrease / (increase) in prepaid expenses and other current assets |
|
|
14.4 |
|
|
|
58.9 |
|
Increase / (decrease) in accounts payable and accrued expenses |
|
|
31.3 |
|
|
|
356.1 |
|
Increase / (decrease) in income and other taxes payable |
|
|
(52.2 |
) |
|
|
42.4 |
|
Increase / (decrease) in other assets and liabilities |
|
|
(54.1 |
) |
|
|
25.4 |
|
Net cash provided by operating activities |
|
|
1,218.5 |
|
|
|
525.0 |
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(84.9 |
) |
|
|
(136.6 |
) |
Additions to product rights and other intangibles |
|
|
- |
|
|
|
(8.5 |
) |
Additions to investments |
|
|
- |
|
|
|
(15.0 |
) |
Proceeds from sale of investments and other assets |
|
|
19.0 |
|
|
|
790.5 |
|
Proceeds from sales of property, plant and equipment |
|
|
12.1 |
|
|
|
74.9 |
|
Acquisitions of businesses, net of cash acquired |
|
|
- |
|
|
|
(34,646.2 |
) |
Net cash (used in) investing activities |
|
|
(53.8 |
) |
|
|
(33,940.9 |
) |
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from borrowings of long-term indebtedness |
|
|
- |
|
|
|
26,455.6 |
|
Proceeds from borrowings on credit facility and other |
|
|
900.0 |
|
|
|
2,810.0 |
|
Debt issuance and other financing costs |
|
|
- |
|
|
|
(310.8 |
) |
Payments on debt, including capital lease obligations |
|
|
(854.2 |
) |
|
|
(2,660.0 |
) |
Proceeds from issuance of preferred shares |
|
|
- |
|
|
|
4,929.7 |
|
Proceeds from issuance of ordinary shares |
|
|
- |
|
|
|
4,071.1 |
|
Proceeds from stock plans |
|
|
69.6 |
|
|
|
42.6 |
|
Payments of contingent consideration |
|
|
(32.3 |
) |
|
|
(24.6 |
) |
Repurchase of ordinary shares |
|
|
(53.2 |
) |
|
|
(64.1 |
) |
Dividends |
|
|
(69.6 |
) |
|
|
- |
|
Excess tax benefit from stock-based compensation |
|
|
34.6 |
|
|
|
36.1 |
|
Net cash (used in)/ provided by financing activities |
|
|
(5.1 |
) |
|
|
35,285.6 |
|
Effect of currency exchange rate changes on cash and cash equivalents |
|
|
5.2 |
|
|
|
(4.8 |
) |
Net increase in cash and cash equivalents |
|
|
1,164.8 |
|
|
|
1,864.9 |
|
Cash and cash equivalents at beginning of period |
|
|
1,096.0 |
|
|
|
250.0 |
|
Cash and cash equivalents at end of period |
|
$ |
2,260.8 |
|
|
$ |
2,114.9 |
|
Schedule of Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Dividends accrued |
|
$ |
24.1 |
|
|
$ |
23.4 |
|
Non-cash equity issuance for the Acquisition of Allergan net assets |
|
$ |
- |
|
|
$ |
34,687.2 |
|
See accompanying Notes to Consolidated Financial Statements.
6
(Unaudited; in millions)
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,247.7 |
|
|
$ |
1,036.2 |
|
Marketable securities |
|
|
13.0 |
|
|
|
9.3 |
|
Accounts receivable, net |
|
|
2,652.8 |
|
|
|
2,401.6 |
|
Receivables from Parents |
|
|
382.6 |
|
|
|
457.3 |
|
Inventories |
|
|
1,022.2 |
|
|
|
1,009.7 |
|
Prepaid expenses and other current assets |
|
|
631.9 |
|
|
|
519.7 |
|
Current assets held for sale |
|
|
3,508.4 |
|
|
|
3,540.3 |
|
Total current assets |
|
|
10,458.6 |
|
|
|
8,974.1 |
|
Property, plant and equipment, net |
|
|
1,602.4 |
|
|
|
1,573.9 |
|
Investments and other assets |
|
|
405.5 |
|
|
|
417.9 |
|
Non current assets held for sale |
|
|
10,636.8 |
|
|
|
10,541.3 |
|
Deferred tax assets |
|
|
77.6 |
|
|
|
49.5 |
|
Product rights and other intangibles |
|
|
66,535.8 |
|
|
|
67,931.7 |
|
Goodwill |
|
|
46,724.0 |
|
|
|
46,551.5 |
|
Total assets |
|
$ |
136,440.7 |
|
|
$ |
136,039.9 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
4,659.5 |
|
|
$ |
4,295.4 |
|
Payables to Parents |
|
|
1,561.1 |
|
|
|
1,466.8 |
|
Income taxes payable |
|
|
68.5 |
|
|
|
54.2 |
|
Current portion of long-term debt and capital leases |
|
|
4,015.7 |
|
|
|
2,396.5 |
|
Current liabilities held for sale |
|
|
1,410.2 |
|
|
|
1,491.8 |
|
Total current liabilities |
|
|
11,715.0 |
|
|
|
9,704.7 |
|
Long-term debt and capital leases |
|
|
38,551.8 |
|
|
|
40,133.9 |
|
Other long-term liabilities |
|
|
1,024.0 |
|
|
|
1,262.0 |
|
Long-term liabilities held for sale |
|
|
512.4 |
|
|
|
580.1 |
|
Other taxes payable |
|
|
777.4 |
|
|
|
801.9 |
|
Deferred tax liabilities |
|
|
7,563.9 |
|
|
|
7,985.7 |
|
Total liabilities |
|
|
60,144.5 |
|
|
|
60,468.3 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Members' capital |
|
|
72,935.1 |
|
|
|
72,935.1 |
|
Retained earnings |
|
|
3,334.0 |
|
|
|
3,132.7 |
|
Accumulated other comprehensive income / (loss) |
|
|
28.4 |
|
|
|
(494.1 |
) |
Total members’ equity |
|
|
76,297.5 |
|
|
|
75,573.7 |
|
Noncontrolling interest |
|
|
(1.3 |
) |
|
|
(2.1 |
) |
Total equity |
|
|
76,296.2 |
|
|
|
75,571.6 |
|
Total liabilities and equity |
|
$ |
136,440.7 |
|
|
$ |
136,039.9 |
|
See accompanying Notes to Consolidated Financial Statements.
7
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Net revenues |
|
$ |
3,795.9 |
|
|
$ |
2,562.6 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights) |
|
|
811.8 |
|
|
|
1,020.1 |
|
Research and development |
|
|
403.1 |
|
|
|
317.7 |
|
Selling and marketing |
|
|
795.8 |
|
|
|
569.6 |
|
General and administrative |
|
|
327.4 |
|
|
|
536.9 |
|
Amortization |
|
|
1,592.1 |
|
|
|
787.8 |
|
In-process research and development impairments |
|
|
6.0 |
|
|
|
- |
|
Asset sales and impairments, net |
|
|
(1.7 |
) |
|
|
4.6 |
|
Total operating expenses |
|
|
3,934.5 |
|
|
|
3,236.7 |
|
Operating (loss) |
|
|
(138.6 |
) |
|
|
(674.1 |
) |
Non-operating income (expense): |
|
|
|
|
|
|
|
|
Interest income |
|
|
3.1 |
|
|
|
1.8 |
|
Interest expense |
|
|
(332.8 |
) |
|
|
(171.9 |
) |
Other income (expense), net |
|
|
0.5 |
|
|
|
(197.9 |
) |
Total other income (expense), net |
|
|
(329.2 |
) |
|
|
(368.0 |
) |
(Loss) before income taxes and noncontrolling interest |
|
|
(467.8 |
) |
|
|
(1,042.1 |
) |
(Benefit) for income taxes |
|
|
(402.0 |
) |
|
|
(259.0 |
) |
Net (loss) from continuing operations, net of tax |
|
|
(65.8 |
) |
|
|
(783.1 |
) |
Income from discontinued operations, net of tax |
|
|
337.4 |
|
|
|
274.4 |
|
Net income / (loss) |
|
|
271.6 |
|
|
|
(508.7 |
) |
(Income) / loss attributable to noncontrolling interest |
|
|
(0.7 |
) |
|
|
0.3 |
|
Net income / (loss) attributable to members |
|
$ |
270.9 |
|
|
$ |
(508.4 |
) |
See accompanying Notes to Consolidated Financial Statements.
8
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME / (LOSS)
(Unaudited; in millions)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Net income / (loss) |
|
$ |
271.6 |
|
|
$ |
(508.7 |
) |
Other comprehensive income / (loss) |
|
|
|
|
|
|
|
|
Foreign currency translation (losses) / gains |
|
|
542.8 |
|
|
|
(313.9 |
) |
Unrealized (losses), net of tax |
|
|
(20.3 |
) |
|
|
(4.0 |
) |
Reclassification for gains included in net income, net of tax |
|
|
- |
|
|
|
- |
|
Total other comprehensive income / (loss), net of tax |
|
|
522.5 |
|
|
|
(317.9 |
) |
Comprehensive income / (loss) |
|
|
794.1 |
|
|
|
(826.6 |
) |
Comprehensive (income) / loss attributable to noncontrolling interest |
|
|
(0.7 |
) |
|
|
0.3 |
|
Comprehensive income / (loss) attributable to members |
|
$ |
793.4 |
|
|
$ |
(826.3 |
) |
See accompanying Notes to Consolidated Financial Statements.
9
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
Net income / (loss) |
|
$ |
271.6 |
|
|
$ |
(508.7 |
) |
Reconciliation to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
42.1 |
|
|
|
57.2 |
|
Amortization |
|
|
1,592.1 |
|
|
|
925.4 |
|
Provision for inventory reserve |
|
|
59.2 |
|
|
|
30.3 |
|
Share-based compensation |
|
|
99.0 |
|
|
|
225.5 |
|
Deferred income tax benefit |
|
|
(519.2 |
) |
|
|
(304.3 |
) |
In-process research and development impairments |
|
|
6.0 |
|
|
|
3.7 |
|
Loss / (gain) on asset sales and impairments, net |
|
|
(1.7 |
) |
|
|
54.1 |
|
Amortization of inventory step-up |
|
|
42.4 |
|
|
|
212.9 |
|
Amortization of deferred financing costs |
|
|
10.0 |
|
|
|
268.3 |
|
Contingent consideration adjustments, including accretion |
|
|
33.6 |
|
|
|
28.8 |
|
Other, net |
|
|
(9.1 |
) |
|
|
(6.5 |
) |
Changes in assets and liabilities (net of effects of acquisitions): |
|
|
|
|
|
|
|
|
Decrease / (increase) in accounts receivable, net |
|
|
(148.6 |
) |
|
|
(701.4 |
) |
Decrease / (increase) in inventories |
|
|
(148.5 |
) |
|
|
(202.7 |
) |
Decrease / (increase) in prepaid expenses and other current assets |
|
|
14.5 |
|
|
|
59.0 |
|
Increase / (decrease) in accounts payable and accrued expenses |
|
|
18.8 |
|
|
|
387.6 |
|
Increase / (decrease) in income and other taxes payable |
|
|
(52.2 |
) |
|
|
42.4 |
|
Increase / (decrease) in other assets and liabilities, including receivable / payable with Parents |
|
|
6.2 |
|
|
|
(44.9 |
) |
Net cash provided by operating activities |
|
|
1,316.2 |
|
|
|
526.7 |
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(84.9 |
) |
|
|
(136.6 |
) |
Additions to product rights and other intangibles |
|
|
- |
|
|
|
(8.5 |
) |
Additions to investments |
|
|
- |
|
|
|
(15.0 |
) |
Proceeds from the sale of investments and other assets |
|
|
19.0 |
|
|
|
790.5 |
|
Proceeds from sales of property, plant and equipment |
|
|
12.1 |
|
|
|
74.9 |
|
Acquisitions of businesses, net of cash acquired |
|
|
- |
|
|
|
(34,646.2 |
) |
Net cash (used in) investing activities |
|
|
(53.8 |
) |
|
|
(33,940.9 |
) |
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from borrowings of long-term indebtedness |
|
|
- |
|
|
|
26,455.6 |
|
Proceeds from borrowings on credit facility and other |
|
|
900.0 |
|
|
|
2,810.0 |
|
Debt issuance and other financing costs |
|
|
- |
|
|
|
(310.8 |
) |
Payments on debt, including capital lease obligations |
|
|
(854.2 |
) |
|
|
(2,660.0 |
) |
Payments of contingent consideration |
|
|
(32.3 |
) |
|
|
(24.6 |
) |
Dividend to Parent |
|
|
(69.6 |
) |
|
|
- |
|
Contribution from Parent |
|
|
- |
|
|
|
9,000.8 |
|
Net cash provided by financing activities |
|
|
(56.1 |
) |
|
|
35,271.0 |
|
Effect of currency exchange rate changes on cash and cash equivalents |
|
|
5.2 |
|
|
|
(4.8 |
) |
Net increase in cash and cash equivalents |
|
|
1,211.5 |
|
|
|
1,852.0 |
|
Cash and cash equivalents at beginning of period |
|
|
1,036.2 |
|
|
|
244.3 |
|
Cash and cash equivalents at end of period |
|
$ |
2,247.7 |
|
|
$ |
2,096.3 |
|
See accompanying Notes to Consolidated Financial Statements
10
ALLERGAN PLC AND WARNER CHILCOTT LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — General
Allergan plc is focused on developing, manufacturing and commercializing innovative branded pharmaceuticals (“brand”, “branded” or “specialty brand”), high-quality generic and over-the-counter (“OTC”) medicines and biologic products for patients around the world.
Allergan markets a portfolio of best-in-class products that provide valuable treatments for the central nervous system, eye care, medical aesthetics, gastroenterology, women's health, urology, cardiovascular and anti-infective therapeutic categories, and operates the world's third-largest global generics business, providing patients around the globe with increased access to affordable, high-quality medicines. Allergan is an industry leader in research and development, with one of the broadest development pipelines in the pharmaceutical industry and a leading position in the submission of generic product applications globally.
With commercial operations in approximately 100 countries, Allergan is committed to working with physicians, healthcare providers and patients to deliver innovative and meaningful treatments that help people around the world live longer, healthier lives. Warner Chilcott Limited is a wholly-owned subsidiary of Allergan plc and has the same principal business activities. As a result of the Allergan Acquisition (defined below) which closed on March 17, 2015, the Company expanded its franchises to include ophthalmology, neurosciences and medical aesthetics/dermatology/plastic surgery, which complements the Company’s existing central nervous system, gastroenterology, women’s health and urology franchises. The combined company benefits significantly from Allergan, Inc’s. (“Legacy Allergan”) global brand equity and consumer awareness of key products, including Botox® and Restasis®. The Allergan Acquisition also expanded our presence and market and product reach across many international markets, with strengthened commercial positions across Canada, Europe, Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America.
The results of our discontinued operations include the results of our generic product development, manufacturing and distribution of off-patent pharmaceutical products, established international brands marketed similarly to generic products and out-licensed generic pharmaceutical products primarily in Europe through our Medis third-party business.
On July 26, 2015 we entered into a master purchase agreement (the “Teva Agreement”), under which Teva Pharmaceutical Industries Ltd. (“Teva”) agreed to acquire our global generic pharmaceuticals business and certain other assets (the “Teva Transaction”). Under the Teva Agreement, upon the closing of the Teva Transaction, we will receive $33.75 billion in cash and 100.3 million Teva ordinary shares (or American Depository Shares with respect thereto), which approximates $6.75 billion in Teva stock using the then-current stock price at the time the Teva Transaction was announced, in exchange for which Teva will acquire our global generics business, including the United States (“U.S.”) and international generic commercial units, our third-party supplier Medis, our global generic manufacturing operations, our global generic research and development (“R&D”) unit, our international OTC commercial unit (excluding OTC eye care products) and some established international brands. The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2016. As a result of the transaction, and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) number 2014-08 “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, the Company is accounting for the assets and liabilities to be divested as held for sale. Further, the financial results of the business held for sale have been reclassified to discontinued operations for all periods presented in our consolidated financial statements.
The accompanying consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2015 (“Annual Report”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been condensed or omitted from the accompanying consolidated financial statements. The accompanying year end consolidated balance sheet was derived from the audited financial statements included in the Annual Report. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s consolidated financial position, results of operations, comprehensive income/(loss) and cash flows for the periods presented. Unless otherwise noted, all such adjustments are of a normal, recurring nature. All intercompany transactions and balances have been eliminated in consolidation. The Company’s results of operations, comprehensive income / (loss) and cash flows for the interim periods are not necessarily indicative of the results of operations, comprehensive income / (loss) and cash flows that it may achieve in future periods.
11
In connection with the Allergan Acquisition, the Company changed its name from Actavis plc to Allergan plc. Actavis plc’s ordinary shares were traded on the NYSE under the symbol “ACT” until the opening of trading on June 15, 2015, at which time Actavis plc changed its corporate name to “Allergan plc” and changed its ticker symbol to “AGN.” Pursuant to Rule 12g-3(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Allergan plc is the successor issuer to Actavis plc’s ordinary shares which are deemed to be registered under Section 12(b) of the Exchange Act, and Allergan plc is subject to the informational requirements of the Exchange Act, and the rules and regulations promulgated thereunder.
References throughout to “we,” “our,” “us,” the “Company” or “Allergan” refer to financial information and transactions of Allergan plc. References to “Warner Chilcott Limited” refer to Warner Chilcott Limited, the Company’s indirect wholly-owned subsidiary, and, unless the context otherwise requires, its subsidiaries.
NOTE 2 – Reconciliation of Warner Chilcott Limited results to Allergan plc results
Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc (together with other Warner Chilcott Limited parents, the “Parent”), the ultimate parent of the group. The results of Warner Chilcott Limited are consolidated into the results of Allergan plc. Due to the deminimis activity between Allergan plc and Warner Chilcott Limited, references throughout this filing relate to both Allergan plc and Warner Chilcott Limited. Warner Chilcott Limited representations relate only to itself and not to any other company.
Except where otherwise indicated, and excluding certain insignificant cash and non-cash transactions at the Allergan plc level, these notes relate to the consolidated financial statements for both separate registrants, Allergan plc and Warner Chilcott Limited. In addition to certain inter-company payable and receivable amounts between the entities, the following is a reconciliation of the results of Warner Chilcott Limited to Allergan plc ($ in millions):
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
||||||||||||||||||
|
|
Allergan plc |
|
|
Warner Chilcott Limited |
|
|
Difference |
|
|
Allergan plc |
|
|
Warner Chilcott Limited |
|
|
Difference |
|
||||||
Cash and cash equivalents |
|
$ |
2,260.8 |
|
|
$ |
2,247.7 |
|
|
$ |
13.1 |
|
|
$ |
1,096.0 |
|
|
$ |
1,036.2 |
|
|
$ |
59.8 |
|
Accounts receivable, net |
|
|
2,652.8 |
|
|
|
2,652.8 |
|
|
|
- |
|
|
|
2,401.6 |
|
|
|
2,401.6 |
|
|
|
- |
|
Prepaid expenses and other current assets |
|
|
634.3 |
|
|
|
631.9 |
|
|
|
2.4 |
|
|
|
522.2 |
|
|
|
519.7 |
|
|
|
2.5 |
|
Property, plant and equipment, net |
|
|
1,602.4 |
|
|
|
1,602.4 |
|
|
|
- |
|
|
|
1,573.9 |
|
|
|
1,573.9 |
|
|
|
- |
|
Accounts payable and accrued liabilities |
|
|
4,701.1 |
|
|
|
4,659.5 |
|
|
|
41.6 |
|
|
|
4,349.5 |
|
|
|
4,295.4 |
|
|
|
54.1 |
|
|
|
Three Months Ended March 31, 2016 |
|
|
Three Months Ended March 31, 2015 |
|
||||||||||||||||||
|
|
Allergan plc |
|
|
Warner Chilcott Limited |
|
|
Difference |
|
|
Allergan plc |
|
|
Warner Chilcott Limited |
|
|
Difference |
|
||||||
General and administrative expenses |
|
$ |
342.6 |
|
|
$ |
327.4 |
|
|
$ |
15.2 |
|
|
$ |
540.5 |
|
|
$ |
536.9 |
|
|
$ |
3.6 |
|
Operating (loss) |
|
|
(153.8 |
) |
|
|
(138.6 |
) |
|
|
(15.2 |
) |
|
|
(677.7 |
) |
|
|
(674.1 |
) |
|
|
(3.6 |
) |
(Loss) before income taxes and noncontrolling interest |
|
|
(483.0 |
) |
|
|
(467.8 |
) |
|
|
(15.2 |
) |
|
|
(1,045.7 |
) |
|
|
(1,042.1 |
) |
|
|
(3.6 |
) |
(Benefit) for income taxes |
|
|
(402.0 |
) |
|
|
(402.0 |
) |
|
|
- |
|
|
|
(259.0 |
) |
|
|
(259.0 |
) |
|
|
- |
|
Net (loss) from continuing operations, net of tax |
|
|
(81.0 |
) |
|
|
(65.8 |
) |
|
|
(15.2 |
) |
|
|
(786.7 |
) |
|
|
(783.1 |
) |
|
|
(3.6 |
) |
Net income / (loss) |
|
|
256.4 |
|
|
|
271.6 |
|
|
|
(15.2 |
) |
|
|
(512.3 |
) |
|
|
(508.7 |
) |
|
|
(3.6 |
) |
Dividends on preferred stock |
|
|
69.6 |
|
|
|
- |
|
|
|
69.6 |
|
|
|
23.2 |
|
|
|
- |
|
|
|
23.2 |
|
Net income / (loss) attributable to ordinary shareholder/members |
|
|
186.1 |
|
|
|
270.9 |
|
|
|
(84.8 |
) |
|
|
(535.2 |
) |
|
|
(508.4 |
) |
|
|
(26.8 |
) |
The difference between general and administrative expenses in the three months ended March 31, 2016 and 2015 were due to corporate related expenses incurred at Allergan plc as well as non-recurring transaction costs. Movements in equity are due to historical differences in the results of operations of the companies and differences in equity awards.
12
NOTE 3 — Summary of Significant Accounting Policies
The following are interim updates to certain of the policies described in “Note 4” of the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2015 included in the Annual Report.
Reclassifications
In April 2015, the FASB issued guidance which changes the classification of debt issuance costs from being an asset on the balance sheet to netting the costs against the carrying value of the debt. As a result, the Company reclassified debt issuance costs as of December 31, 2015 by decreasing “prepaid expenses and other current assets” and “current portion of long-term debt and capital leases” by $36.3 million as well as decreasing “investments and other assets” and “long-term debt and capital leases” by $159.5 million. In addition, the Company made certain presentation reclassifications relating to segment results and guarantor financial statements.
Revenue Recognition
General
Revenue from product sales is recognized when title and risk of loss to the product transfers to the customer, which is based on the transaction shipping terms. Recognition of revenue also requires reasonable assurance of collection of sales proceeds, the seller’s price to the buyer to be fixed or determinable and the completion of all performance obligations. The Company warrants products against defects and for specific quality standards, permitting the return of products under certain circumstances. Product sales are recorded net of all sales-related deductions including, but not limited to: chargebacks, trade discounts, billback adjustments, sales returns and allowances, commercial and government rebates, customer loyalty programs and fee for service arrangements with certain distributors, which we refer to in the aggregate as “SRA” allowances.
Royalty and commission revenue is recognized as a component of net revenues in accordance with the terms of their respective contractual agreements when collectability is reasonably assured and when revenue can be reasonably measured.
Provisions for SRAs
As is customary in the pharmaceutical industry, our gross product sales are subject to a variety of deductions in arriving at reported net product sales. When the Company recognizes gross revenue from the sale of products, an estimate of SRA is recorded, which reduces the product revenues. Accounts receivable and/or accrued liabilities are also reduced and/or increased by the SRA amount depending on whether we have the right of offset with the customer. These provisions are estimated based on historical payment experience, historical relationship of the deductions to gross product revenues, government regulations, estimated utilization or redemption rates, estimated customer inventory levels and current contract sales terms. The estimation process used to determine our SRA provision has been applied on a consistent basis and no material revenue adjustments have been necessary to increase or decrease our reserves for SRA as a result of a significant change in underlying estimates. The Company uses a variety of methods to assess the adequacy of the SRA reserves to ensure that our financial statements are fairly stated.
Chargebacks — A chargeback represents an amount payable in the future to a wholesaler for the difference between the invoice price paid by our wholesale customer for a particular product and the negotiated contract price that the wholesaler’s customer pays for that product. The chargeback provision and related reserve varies with changes in product mix, changes in customer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of the expected wholesaler sell-through levels to indirect customers at certain contract prices. The Company validates the chargeback accrual quarterly through a review of the inventory reports obtained from our largest wholesale customers. This customer inventory information is used to verify the estimated liability for future chargeback claims based on historical chargeback and contract rates. These large wholesalers represent the vast majority of the recipients of the Company’s chargeback payments. We continually monitor current pricing trends and wholesaler inventory levels to ensure the liability for future chargebacks is fairly stated.
Rebates — Rebates include volume related incentives to direct and indirect customers, third-party managed care and Medicare Part D rebates, Medicaid rebates and other government rebates. Rebates are accrued based on an estimate of claims to be paid for product sold into trade by the Company. Volume rebates are generally offered to customers as an incentive to use the Company’s products and to encourage greater product sales. These rebate programs include contracted rebates based on customers’ purchases made during an applicable monthly, quarterly or annual period. The provision for third-party rebates is estimated based on our customers’ contracted rebate programs and the Company’s historical experience of rebates paid. Any significant changes to our customer rebate programs are considered in establishing the provision for rebates. The provisions for government rebates are based, in part, upon historical experience of claims submitted by the various states / authorities, contractual terms and government regulations. We monitor legislative changes to determine what impact such legislation may have on our provision.
13
Cash Discounts — Cash discounts are provided to customers that pay within a specific period. The provision for cash discounts is estimated based upon invoice billings and historical customer payment experience. The Company’s experience of payment history is fairly consistent and most customer payments qualify for the cash discount.
Returns and Other Allowances — The Company’s provision for returns and other allowances include returns, pricing adjustments, promotional allowances, loyalty cards and billback adjustments.
Consistent with industry practice, the Company maintains a returns policy that allows customers to return product for a credit. In accordance with the Company’s policy, credits for customer returns of products are applied against outstanding account activity or are settled in cash. Product exchanges are not permitted. Customer returns of product are generally not resalable. The Company’s estimate of the provision for returns is based upon historical experience and current trends of actual customer returns. Additionally, we consider other factors when estimating the current period returns provision, including levels of inventory in the distribution channel, as well as significant market changes which may impact future expected returns.
Pricing adjustments, which includes shelf stock adjustments, (primarily relate to our generics business held for sale) are credits issued to reflect price decreases in selling prices charged to the Company’s direct customers. Shelf stock adjustments are based upon the amount of product our customers have in their inventory at the time of an agreed-upon price reduction. The provision for shelf stock adjustments is based upon specific terms with the Company’s customers and includes estimates of existing customer inventory levels based upon their historical purchasing patterns. We regularly monitor all price changes to evaluate the Company’s reserve balances. The adequacy of these reserves is readily determinable as pricing adjustments and shelf stock adjustments are negotiated and settled on a customer-by-customer basis.
Promotional allowances are credits that are issued in connection with a product launch or as an incentive for customers to carry our product. The Company establishes a reserve for promotional allowances based upon contractual terms.
Billback adjustments, which primarily relate to our generics business held for sale, are credits that are issued to certain customers who purchase directly from us as well as indirectly through a wholesaler. These credits are issued in the event there is a difference between the customer’s direct and indirect contract price. The provision for billbacks is estimated based upon historical purchasing patterns of qualified customers who purchase product directly from us and supplement their purchases indirectly through our wholesale customers.
Loyalty cards allow the end user patients a discount per prescription and are accrued based on historical experience, contract terms and the volume of product and cards in the distribution channel.
Accounts receivable balances in the Company’s consolidated financial statements are presented net of SRA estimates. SRA balances in accounts receivable were $208.1 million and $263.8 million at March 31, 2016 and December 31, 2015, respectively. SRA balances within accounts payable and accrued expenses were $1,800.7 million and $1,570.0 million at March 31, 2016 and December 31, 2015, respectively. The movements in the SRA reserve balances for continuing operations in the three months ended March 31, 2016 are as follows ($ in millions):
Balance as of December 31, 2015 |
|
$ |
1,833.8 |
|
Provision to reduce gross product sales to net product sales |
|
|
1,668.0 |
|
Payments and other |
|
|
(1,493.0 |
) |
Balance as of March 31, 2016 |
|
$ |
2,008.8 |
|
The provisions recorded to reduce gross product sales to net product sales, excluding discontinued operations, were as follows ($ in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Gross product sales |
|
$ |
5,429.4 |
|
|
$ |
3,576.7 |
|
Provisions to reduce gross product sales to net product sales |
|
|
(1,668.0 |
) |
|
|
(1,041.1 |
) |
Net product sales |
|
$ |
3,761.4 |
|
|
$ |
2,535.6 |
|
Percentage of provisions to gross sales |
|
|
30.7 |
% |
|
|
29.1 |
% |
14
The Company also had SRA reserves relating to discontinued operations of $1,598.3 million and $1,720.1 million as of March 31, 2016 and December 31, 2015, respectively.
Litigation and Contingencies
The Company is involved in various legal proceedings in the normal course of its business, including product liability litigation, intellectual property litigation, employment litigation and other litigation. Additionally, the Company, in consultation with its counsel, assesses the need to record a liability for contingencies on a case-by-case basis in accordance with FASB Accounting Standards Codification (“ASC”) Topic 450 “Contingencies” (“ASC 450”). Accruals are recorded when the Company determines that a loss related to a matter is both probable and reasonably estimable. These accruals are adjusted periodically as assessment efforts progress or as additional information becomes available. Acquired contingencies in business combinations are recorded at fair value to the extent determinable, otherwise in accordance ASC 450. Refer to “NOTE 20 — Commitments and Contingencies” for more information.
Earnings Per Share (“EPS”)
The Company computes EPS in accordance with ASC Topic 260, “Earnings Per Share” (“ASC 260”) and related guidance, which requires two calculations of EPS to be disclosed: basic and diluted. Basic EPS is computed by dividing net (loss) / income by the weighted average ordinary shares outstanding during a period. Diluted EPS is based on the treasury stock method and includes the effect from potential issuance of ordinary shares, such as shares issuable pursuant to the exercise of stock options and restricted stock units. Diluted EPS also includes the impact of ordinary share equivalents to be issued upon the mandatory conversion of the Company’s preferred shares. Ordinary share equivalents have been excluded where their inclusion would be anti-dilutive.
A reconciliation of the numerators and denominators of basic and diluted EPS consisted of the following ($ in millions, except per share amounts):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Net income / (loss): |
|
|
|
|
|
|
|
|
Net (loss) attributable to ordinary shareholders excluding income/(loss) from discontinued operations, net of tax |
|
$ |
(151.3 |
) |
|
$ |
(809.6 |
) |
Income from discontinued operations, net of tax |
|
|
337.4 |
|
|
|
274.4 |
|
Net income / (loss) attributable to ordinary shareholders |
|
$ |
186.1 |
|
|
$ |
(535.2 |
) |
|
|
|
|
|
|
|
|
|
Basic weighted average ordinary shares outstanding |
|
|
394.8 |
|
|
|
289.5 |
|
|
|
|
|
|
|
|
|
|
Basic EPS: |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.38 |
) |
|
$ |
(2.80 |
) |
Discontinued operations |
|
$ |
0.85 |
|
|
$ |
0.95 |
|
Net income / (loss) per share |
|
$ |
0.47 |
|
|
$ |
(1.85 |
) |
|
|
|
|
|
|
|
|
|
Diluted weighted average ordinary shares outstanding |
|
|
394.8 |
|
|
|
289.5 |
|
|
|
|
|
|
|
|
|
|
Diluted EPS: |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.38 |
) |
|
$ |
(2.80 |
) |
Discontinued operations |
|
$ |
0.85 |
|
|
$ |
0.95 |
|
Net income / (loss) per share |
|
$ |
0.47 |
|
|
$ |
(1.85 |
) |
Stock awards to purchase 5.4 million ordinary shares for the three months ended March 31, 2016, were outstanding, but not included in the computation of diluted EPS, because the awards were anti-dilutive for continuing operations and as such the treatment for discontinued operations is also anti-dilutive. The weighted average impact of ordinary share equivalents of 17.6 million for the three months ended March 31 2016, which are anticipated to result from the mandatory conversion of the Company’s preferred shares were not included in the calculation of diluted EPS as their impact would be anti-dilutive.
Stock awards to purchase 3.5 million ordinary shares during the three months ended March 31, 2015 were outstanding, but not included in the computation of diluted EPS, because the impact of the awards were anti-dilutive for continuing operations and as such the treatment for discontinued operations is also anti-dilutive. The weighted average impact of ordinary share equivalents of
15
5.5 million which are anticipated to result from the mandatory conversion of the Company’s preferred shares as of March 31, 2015 were not included in the calculation of diluted EPS as their impact would be anti-dilutive.
Restructuring Costs
The Company records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. In accordance with existing benefit arrangements, employee severance costs are accrued when the restructuring actions are probable and estimable. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. The Company also incurs costs with contract terminations and costs of transferring products as part of restructuring activities. Refer to “NOTE 19 — Business Restructuring Charges” for more information.
Recent Accounting Pronouncements
On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), with an effective date for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, for public business entities, certain not-for-profit entities, and certain employee benefit plans. The effective date for ASU 2014-09 was deferred by one year through the issuance of ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations.
In January 2016, the FASB issued Accounting Standards Update 2016-01, which changes the requirement to require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance is not anticipated to have a material impact on the Company’s financial position or results of operations.
In February 2016, the FASB issued Accounting Standards Update 2016-02, which states that a lessee should recognize the assets and liabilities that arise from leases. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, the pronouncement will have on our financial positions and results of operations.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. The Company is evaluating the impact the pronouncement will have on our financial positions and results of operations.
In March 2016, the FASB has issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 Revenue from Contracts with Customers requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (i.e., the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is an agent). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date and transition of these amendments is the same as the effective date and transition requirements in Topic 606. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations.
In April 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations.
16
NOTE 4 — Acquisitions and Other Agreements
During the three months ended March 31, 2015, the Company acquired material assets and businesses. The pro forma results of the businesses acquired that materially impacted the reported results of the Company are as follows (unaudited; $ in millions except per share information):
|
|
Three Months Ended March 31, 2015 |
|
|||||||||
|
|
As reported |
|
|
Allergan Acquisition |
|
|
Pro Forma |
|
|||
Net Revenue |
|
$ |
2,562.6 |
|
|
$ |
1,523.0 |
|
|
$ |
4,085.6 |
|
Net (loss) / income attributable to ordinary shareholders |
|
$ |
(535.2 |
) |
|
$ |
377.7 |
|
|
$ |
(157.5 |
) |
Net (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(1.85 |
) |
|
|
|
|
|
$ |
(0.40 |
) |
Diluted |
|
$ |
(1.85 |
) |
|
|
|
|
|
$ |
(0.40 |
) |
Pro forma net (loss) per share includes the impact of share issuances as part of the Allergan Acquisition.
2016 Transactions
The following are the material transactions that were completed in the three months ended March 31, 2016.
Licenses and Asset Acquisitions
Anterios
On January 6, 2016, the Company acquired Anterios, Inc. (“Anterios”), a clinical stage biopharmaceutical company developing a next generation delivery system and botulinum toxin-based prescription products. Under the terms of the agreement, the Company acquired Anterios for an upfront net payment of approximately $90.0 million and potential development and commercialization milestone payments related to an investigational topical formulation of botulinum toxin type A in development for the potential treatment of hyperhidrosis, acne, and crow’s feet lines and the related NDS™, Anterios' proprietary platform delivery technology that enables local, targeted delivery of neurotoxins through the skin without the need for injections (“the Anterios Transaction”). Total future milestone payments could amount to $387.5 million. The Company concluded based on the stage of development of the assets, the lack of acquired employees as well as certain other inputs and processes that the transaction did not qualify as a business. The total upfront net payment of approximately $90.0 million was expensed as a component of R&D expense and the future milestones will be recorded when the payment becomes probable.
2015 Transactions
The following are the material transactions that were completed in the year ended December 31, 2015.
Acquisitions
AqueSys
On October 16, 2015, the Company acquired AqueSys, Inc. (“AqueSys”), a private, clinical-stage medical device company focused on developing ocular implants that reduce intraocular pressure (“IOP”) associated with glaucoma, in an all-cash transaction. Under the terms of the agreement, the Company acquired AqueSys for an acquisition accounting purchase price of $298.9 million, including $193.5 million for the estimated fair value of contingent consideration relating to the regulatory approval and commercialization milestone payments. The Company acquired AqueSys for its development program, including XEN45, a soft shunt that is implanted in the sub conjunctival space in the eye through a minimally invasive procedure with a single use, pre-loaded proprietary injector (the “AqueSys Acquisition”).
Assets Acquired and Liabilities Assumed at Fair Value
The AqueSys Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.
17
The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date ($ in millions):
|
|
Amount |
|
|
Cash and cash equivalents |
|
$ |
6.2 |
|
Current assets |
|
|
1.2 |
|
IPR&D intangible assets |
|
|
302.0 |
|
Intangible assets |
|
|
221.0 |
|
Goodwill |
|
|
138.5 |
|
Current liabilities |
|
|
(6.9 |
) |
Contingent consideration |
|
|
(193.5 |
) |
Deferred tax liabilities, net |
|
|
(169.6 |
) |
Net assets acquired |
|
$ |
298.9 |
|
Kythera
On October 1, 2015, the Company acquired Kythera Biopharmaceuticals (“Kythera”), for $75 per share, or an acquisition accounting purchase price of $2,089.5 million (the “Kythera Acquisition”). Kythera was focused on the discovery, development and commercialization of novel prescription aesthetic products. Kythera’s lead product, Kybella® injection, is the first and only Food and Drug Administration (“FDA”) approved, non-surgical treatment for moderate to severe submental fullness, commonly referred to as double chin.
Assets Acquired and Liabilities Assumed at Fair Value
The Kythera Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.
The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date ($ in millions):
|
|
Amount |
|
|
Cash and cash equivalents |
|
$ |
78.1 |
|
Marketable securities |
|
|
79.9 |
|
Inventory |
|
|
18.2 |
|
Other current assets |
|
|
14.5 |
|
IPR&D intangible assets |
|
|
320.0 |
|
Intangible assets |
|
|
2,120.0 |
|
Goodwill |
|
|
328.7 |
|
Other current liabilities |
|
|
(48.6 |
) |
Deferred tax, net |
|
|
(766.7 |
) |
Outstanding indebtedness |
|
|
(54.6 |
) |
Net assets acquired |
|
$ |
2,089.5 |
|
Auden Mckenzie
On May 29, 2015 the Company acquired Auden Mckenzie Holdings Limited (“Auden”), a company specializing in the development, licensing and marketing of niche generic medicines and proprietary brands in the United Kingdom (“UK”) and across Europe for approximately 323.7 million British Pounds, or $495.9 million (the “Auden Acquisition”). The assets and liabilities acquired, as well as the results of operations for the acquired Auden business are part of the assets being divested in the Teva Transaction and are included as a component of income from discontinued operations. In addition the acquired financial position is included in assets and liabilities held for sale.
Recognition and Measurement of Assets Acquired and Liabilities Assumed at Fair Value
The Auden Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.
18
The following table summarizes the final fair values of the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date ($ in millions):
|
|
Amount |
|
|
Cash and cash equivalents |
|
$ |
32.2 |
|
Inventory |
|
|
49.1 |
|
IPR&D intangible assets |
|
|
38.6 |
|
Intangible assets |
|
|
342.4 |
|
Goodwill |
|
|
123.3 |
|
Other assets and liabilities |
|
|
7.2 |
|
Contingent consideration |
|
|
(17.3 |
) |
Deferred tax liabilities, net |
|
|
(79.6 |
) |
Net assets acquired |
|
$ |
495.9 |
|
Allergan
On March 17, 2015, the Company acquired Legacy Allergan for approximately $77.0 billion including outstanding indebtedness assumed of $2.2 billion, cash consideration of $40.1 billion and equity consideration of $34.7 billion, which includes outstanding equity awards (the “Allergan Acquisition”). Under the terms of the agreement, Legacy Allergan shareholders received 111.2 million of the Company’s ordinary shares, 7.0 million of the Company’s non-qualified stock options and 0.5 million of the Company’s share units. The addition of Allergan Inc.’s therapeutic franchises in ophthalmology, neurosciences and medical aesthetics/dermatology/plastic surgery complements the Company’s existing central nervous system, gastroenterology, women’s health and urology franchises. The combined company will also benefit significantly from Legacy Allergan’s global brand equity and consumer awareness of key products, including Botox® and Restasis®. The transaction also expands our presence and market and product reach across many international markets, with strengthened commercial positions across Canada, Europe, Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America.
Inventories
The fair value of inventories acquired included an acquisition accounting fair market value step-up of $923.9 million. In the three months ended March 31, 2016 and 2015, the Company recognized $21.6 million and $71.0 million, respectively, as a component of cost of sales as the inventory acquired was sold to the Company’s customers.
19
As a result of the acquisition, the Company incurred the following transaction and integration costs in the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, 2016 |
|
|
Three Months Ended March 31, 2015 |
|
||
Cost of sales |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Legacy Allergan employees |
|
$ |
3.1 |
|
|
$ |
6.9 |
|
Acquisition, integration and restructuring related charges |
|
|
3.9 |
|
|
|
10.9 |
|
Research and development |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Legacy Allergan employees |
|
|
13.9 |
|
|
|
55.5 |
|
Acquisition, integration and restructuring related charges |
|
|
2.8 |
|
|
|
59.9 |
|
Selling and marketing |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Legacy Allergan employees |
|
|
20.5 |
|
|
|
23.2 |
|
Acquisition, integration and restructuring related charges |
|
|
5.0 |
|
|
|
50.0 |
|
General and administrative |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Legacy Allergan employees |
|
|
9.9 |
|
|
|
183.0 |
|
Acquisition-related expenditures |
|
|
- |
|
|
|
65.5 |
|
Acquisition, integration and restructuring related charges |
|
|
39.8 |
|
|
|
103.7 |
|
Other (expense) income |
|
|
|
|
|
|
|
|
Bridge loan facilities expense |
|
|
- |
|
|
|
(263.0 |
) |
Interest rate lock |
|
|
- |
|
|
|
31.0 |
|
Total transaction and integration costs |
|
$ |
98.9 |
|
|
$ |
790.6 |
|
Licenses and Asset Acquisitions
Migraine License
On August 17, 2015, the Company entered into an agreement with Merck & Co. (“Merck”) under which the Company acquired the exclusive worldwide rights to Merck’s early development stage investigational small molecule oral calcitonin gene-related peptide receptor antagonists, which are being developed for the treatment and prevention of migraines (the “Merck Transaction”). The Merck Transaction is being accounted for as an asset acquisition. The Company acquired these rights for an upfront charge of $250.0 million. The Company concluded based on the stage of development of the assets, the lack of acquired employees and manufacturing as well as certain other inputs and processes that the transaction did not qualify as a business. The Company paid $125.0 million in the year ended December 31, 2015 and the remaining $125.0 million was paid in April 2016. Additionally, Merck is owed contingent payments based on commercial and development milestones of up to $965.0 million as well as royalties.
Divestitures
Respiratory Business
As part of the Forest Acquisition (defined below), we acquired certain assets that comprised Legacy Forest’s branded respiratory business in the U.S. and Canada (the “Respiratory Business”). During the year ended December 31, 2014, we held for sale respiratory assets of $734.0 million, including allocated goodwill to this unit of $309.1 million. On March 2, 2015, the Company sold the Respiratory Business to AstraZeneca plc (“AstraZeneca”) for consideration of $600.0 million upon closing, additional funds to be received for the sale of certain of our inventory to AstraZeneca and low single-digit royalties above a certain revenue threshold. AstraZeneca also paid Allergan an additional $100.0 million and Allergan has agreed to a number of contractual consents and approvals, including certain amendments to the ongoing collaboration agreements between AstraZeneca and Allergan (the “Respiratory Sale”). As a result of the final terms of the agreement, in the quarter ended March 31, 2015, the Company recognized an incremental charge in cost of sales (including the acquisition accounting fair value mark-up of inventory) relating to inventory that will not be sold to AstraZeneca of $35.3 million. The Company also recognized a gain on the sale of the business of $33.5 million, which is included within other (expense) income.
2014 Transactions
The following are the material transactions that were completed in the year ended December 31, 2014.
20
On November 17, 2014, the Company completed its tender offer to purchase all of the outstanding shares of Durata Therapeutics, Inc. (“Durata”), an innovative pharmaceutical company focused on the development and commercialization of novel therapeutics for patients with infectious diseases and acute illnesses (the “Durata Acquisition”). Allergan purchased all outstanding shares of Durata, which were valued at approximately $724.5 million, including the assumption of debt. Additionally, there is one contingent value right (“CVR”) per share, entitling the holder to receive additional cash payments of up to $5.00 per CVR if certain regulatory or commercial milestones related to Durata’s lead product Dalvance™ are achieved. The CVR had an acquisition date fair value of $49.0 million.
Contingent Consideration
At the time of the Durata Acquisition, additional consideration was conditionally due to the seller based upon the approval of DalvanceTM in Europe, the approval of a single dose indication and the product reaching certain sales milestones. The Company estimated the acquisition accounting fair value of the contingent consideration to be $49.0 million using a probability weighted approach that considered the possible outcomes based on assumptions related to the timing and probability of the product launch date, discount rates matched to the timing of the payment, and probability of success rates and discount adjustments on the related cash flows. On March 2, 2015, the Company announced that the European Commission had granted Allergan’s subsidiary Durata Therapeutics International B.V., marketing authorization for Xydalba™ (dalbavancin) for the treatment of acute bacterial skin and skin structure infections (ABSSSI) in adults. The approval triggered the first CVR payment in the quarter ended March 31, 2015 of $30.9 million. In January 2016, the Company received approval from the FDA for an expanded label that will include a single dose of Dalvance®, which triggered a second CVR payment of $30.9 million in the quarter ended March 31, 2016. The difference between the probability weighted fair value and the final payments are recorded as a component of cost of sales.
Forest Laboratories
On July 1, 2014, the Company acquired Forest Laboratories, Inc. (“Legacy Forest”) for $30.9 billion including outstanding indebtedness assumed of $3.3 billion, equity consideration of $20.6 billion, which includes outstanding equity awards, and cash consideration of $7.1 billion (the “Forest Acquisition”). Under the terms of the transaction, Legacy Forest shareholders received 89.8 million Allergan plc ordinary shares, 6.1 million Allergan plc non-qualified stock options and 1.1 million Allergan plc share units. Legacy Forest was a leading, fully integrated, specialty pharmaceutical company largely focused on the United States market. Legacy Forest marketed a portfolio of branded drug products and developed new medicines to treat patients suffering from diseases principally in the following therapeutic areas: central nervous system, cardiovascular, gastrointestinal, respiratory, anti-infective, and cystic fibrosis. A portion of the assets acquired are being divested as part of the Teva Transaction.
Inventories
The fair value of inventories acquired included an acquisition accounting fair market value step-up of $1,036.3 million. In the three months ended March 31, 2016 and 2015, the Company recognized $20.1 million and $136.8 million, respectively, as a component of cost of sales as the inventory acquired on July 1, 2014 was sold to the Company’s customers in addition to a write-off associated with the Respiratory Sale. A portion of these amounts are included in discontinued operations in the three months ended March 31, 2015.
21
As a result of the Forest Acquisition, the Company incurred the following transaction and integration costs in the three months ended March 31, 2016 and March 31, 2015, respectively ($ in millions):
|
|
Three Months Ended March 31, 2016 |
|
|
Three Months Ended March 31, 2015 |
|
||
Cost of sales |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Forest employees |
|
$ |
0.5 |
|
|
$ |
1.2 |
|
Acquisition, integration and restructuring related charges |
|
|
- |
|
|
|
1.0 |
|
Research and development |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Forest employees |
|
|
4.1 |
|
|
|
16.0 |
|
Acquisition, integration and restructuring related charges |
|
|
0.1 |
|
|
|
8.8 |
|
Selling and marketing |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Forest employees |
|
|
7.4 |
|
|
|
19.6 |
|
Acquisition, integration and restructuring related charges |
|
|
- |
|
|
|
16.8 |
|
General and administrative |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Forest employees |
|
|
8.1 |
|
|
|
21.1 |
|
Other integration charges |
|
|
- |
|
|
|
1.6 |
|
Acquisition, integration and restructuring related charges |
|
|
1.2 |
|
|
|
11.4 |
|
Total transaction and integration costs |
|
$ |
21.4 |
|
|
$ |
97.5 |
|
NOTE 5 — Discontinued Operations
Global Generics Business
On July 27, 2015, the Company announced that it entered into the Teva Transaction. Under the Teva Agreement, Teva will acquire Allergan's global generics business, including the U.S. and international generic commercial units, our third-party supplier Medis, our global generic manufacturing operations, our global generic R&D unit, our international OTC commercial unit (excluding OTC eye care products) and some established international brands.
Allergan will retain its global branded pharmaceutical and medical aesthetics businesses, as well as its biosimilars development programs, certain OTC products, and the Anda Distribution business. The Company will also have continuing involvement with Teva after the close of the transaction. As a result of the Teva Transaction, the Company will hold equity in Teva, continue to distribute products divested to Teva through our Anda Distribution segment as well as purchase product manufactured by Teva for sale in our US Brands segment as part of ongoing transitional service and contract manufacturing agreements.
Financial results of the global generics business are presented as "Income from discontinued operations" on the Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015; and assets and liabilities of the global generics business to be disposed of are presented as "Current assets held for sale", "Non current assets held for sale", “Current liabilities held for sale” and “Long term liabilities held for sale” on the Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.
22
The following table presents key financial results of the global generics business included in "Income from discontinued operations" for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Third party revenues |
|
$ |
1,255.3 |
|
|
$ |
1,671.6 |
|
Related party sales |
|
|
41.3 |
|
|
|
69.5 |
|
Net revenues |
|
|
1,296.6 |
|
|
|
1,741.1 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights) |
|
|
693.2 |
|
|
|
762.8 |
|
Research and development |
|
|
112.3 |
|
|
|
113.3 |
|
Selling and marketing |
|
|
112.0 |
|
|
|
165.9 |
|
General and administrative |
|
|
128.4 |
|
|
|
152.5 |
|
Amortization |
|
|
- |
|
|
|
137.6 |
|
In-process research and development impairments, asset sales and impairments, net |
|
|
- |
|
|
|
53.2 |
|
Total operating expenses |
|
|
1,045.9 |
|
|
|
1,385.3 |
|
Operating income |
|
|
250.7 |
|
|
|
355.8 |
|
Other (expense) income, net |
|
|
- |
|
|
|
(0.1 |
) |
(Benefit) / provision for income taxes |
|
|
(86.7 |
) |
|
|
81.3 |
|
Net income from discontinued operations |
|
$ |
337.4 |
|
|
$ |
274.4 |
|
Related party revenues represent the sale of products to the Company’s Anda Distribution segment.
For the period ended March 31, 2016, the Company recorded a deferred tax benefit of $116.1 million related to investments in certain subsidiaries. The recognition of this benefit has been reflected in income from discontinued operations, net of tax with the deferred tax asset reflected in non-current deferred tax assets on the balance sheet.
The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the global generics business to be disposed of ($ in millions):
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
||
Assets: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
1,997.1 |
|
|
$ |
2,089.7 |
|
Inventories |
|
|
1,190.6 |
|
|
|
1,138.5 |
|
Prepaid expenses and other current assets |
|
|
311.4 |
|
|
|
302.8 |
|
Property, plant and equipment, net |
|
|
1,386.7 |
|
|
|
1,355.6 |
|
Investments and other assets |
|
|
32.1 |
|
|
|
33.0 |
|
Non-current deferred tax assets |
|
|
187.4 |
|
|
|
223.7 |
|
Product rights and other intangibles |
|
|
2,937.9 |
|
|
|
2,919.3 |
|
Goodwill |
|
|
6,092.7 |
|
|
|
6,009.7 |
|
Total assets |
|
$ |
14,135.9 |
|
|
$ |
14,072.3 |
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
1,331.3 |
|
|
$ |
1,455.8 |
|
Income taxes payable |
|
|
77.0 |
|
|
|
33.9 |
|
Debt and capital leases |
|
|
5.2 |
|
|
|
5.8 |
|
Other long-term liabilities |
|
|
85.7 |
|
|
|
92.0 |
|
Other taxes payable |
|
|
61.1 |
|
|
|
69.0 |
|
Long-term deferred tax liabilities |
|
|
362.3 |
|
|
|
415.4 |
|
Total liabilities |
|
$ |
1,922.6 |
|
|
$ |
2,071.9 |
|
23
Depreciation and amortization was ceased upon the determination that the held for sale criteria were met, which was the announcement date of the Teva Transaction. The depreciation, amortization and significant operating and investing non-cash items of the discontinued operations were as follows ($ in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Depreciation from discontinued operations |
|
$ |
- |
|
|
$ |
37.0 |
|
Amortization from discontinued operations |
|
|
- |
|
|
|
137.6 |
|
Capital expenditures |
|
|
34.6 |
|
|
|
57.1 |
|
Deferred income taxes (benefit) / expense |
|
|
(104.0 |
) |
|
|
63.8 |
|
NOTE 6 – Assets Held For Sale
The following represents net assets held for sale ($ in millions):
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
||
Prepaid expenses and other assets |
|
$ |
9.3 |
|
|
$ |
9.3 |
|
Total assets held for sale |
|
$ |
9.3 |
|
|
$ |
9.3 |
|
Assets from the Teva Transaction |
|
|
14,135.9 |
|
|
|
14,072.3 |
|
Liabilities from the Teva Transaction |
|
|
1,922.6 |
|
|
|
2,071.9 |
|
Net assets held for sale |
|
$ |
12,222.6 |
|
|
$ |
12,009.7 |
|
As of March 31, 2016 and December 31, 2015, the Company had the following assets held for sale:
|
· |
Total assets and total liabilities relating to the Teva Transaction as discussed further in Note 5 – Discontinued Operations. |
|
· |
Properties acquired in the Forest Acquisition. |
|
· |
Facilities in Irvine, California. |
NOTE 7 — Share-Based Compensation
The Company recognizes compensation expense for all share-based compensation awards made to employees and directors based on the fair value of the awards on the date of grant. A summary of the Company’s share-based compensation plans is presented below.
Equity Award Plans
The Company has adopted several equity award plans which authorize the granting of options, restricted shares, restricted stock units and other forms of equity awards of the Company’s ordinary shares, subject to certain conditions.
The Company granted/grants awards with the following features:
|
· |
Time-based vesting restricted stock awards; |
|
· |
Performance-based restricted stock awards measured to the EBITDA, as defined, of the Company or other performance-based targets defined by the Company; |
|
· |
Performance-based restricted stock awards measured to the Total Stockholders Return, compared to pre-defined metrics; |
|
· |
Non-qualified options to purchase outstanding shares; and |
|
· |
Cash-settled awards recorded as a liability. These cash settled awards are based on pre-established earnings per share, total shareholder returns and cost savings targets. |
Option award plans require options to be granted at the fair value of the shares underlying the options at the date of the grant and generally become exercisable over periods ranging from three to five years. Each option granted expires ten years from the date of the grant. Restricted stock awards are grants that entitle the holder to ordinary shares, subject to certain terms. Restricted stock unit awards are grants that entitle the holder the right to receive an ordinary share, subject to certain terms. Restricted stock and restricted stock unit awards (both time-based vesting and performance-based vesting) generally have restrictions eliminated over a one to four
24
year vesting period. Restrictions generally lapse for non-employee directors after one year. Certain restricted stock units are performance-based awards issued at a target number with the actual number of restricted shares issued ranging based on achievement of the performance criteria. The Company’s equity awards include the acquired awards from the Allergan and Kythera acquisitions (“2015 Acquired Awards”).
Fair Value Assumptions
All restricted stock and restricted stock units (whether time-based vesting or performance-based vesting), are granted and expensed, using the fair value per share on the applicable grant date, over the applicable vesting period. Non-qualified options to purchase ordinary shares are granted to employees at exercise prices per share equal to the closing market price per share on the date of grant. The fair value of non-qualified options is determined on the applicable grant dates using the Black-Scholes method of valuation and that amount is recognized as an expense over the vesting period. Using the Black-Scholes valuation model, the fair value of options is based on the following assumptions:
|
|
2016 Grants |
|
2015 Grants |
|
2015 Acquired Awards |
Dividend yield |
|
0% |
|
0% |
|
0% |
Expected volatility |
|
27.0% |
|
26.0-29.0% |
|
26.0-27.0% |
Risk-free interest rate |
|
1.6% |
|
1.9-2.1% |
|
0.1-2.1% |
Expected term (years) |
|
7.0 |
|
7.0 - 7.5 |
|
up to 6.9 |
Share-Based Compensation Expense
Share-based compensation expense recognized in the Company’s results of operations for the three months ended March 31, 2016 and 2015 were as follows ($ in millions):
|
Three Months Ended March 31, |
|
|||||
|
2016 |
|
|
2015 |
|
||
Equity based compensation awards |
$ |
99.0 |
|
|
$ |
225.5 |
|
Cash-settled equity awards in connection with the Allergan Acquisition |
|
- |
|
|
|
127.1 |
|
Non equity-settled awards other |
|
9.2 |
|
|
|
- |
|
Total stock-based compensation expense |
$ |
108.2 |
|
|
$ |
352.6 |
|
Included in the table above is stock-based compensation relating to discontinued operations of $7.8 million and $10.4 million for the three months ended March 31, 2016 and 2015, respectively.
Included in the equity-based compensation awards for the three months ended March 31, 2016 is the impact of accelerations and step-ups relating to the acquisition accounting treatment of outstanding awards acquired in the Allergan and Forest acquisitions of $34.2 million and $12.9 million, respectively. Included in the three months ended March 31, 2015 is the impact of accelerations and step-ups relating to the acquisition accounting treatment of outstanding awards acquired in the Allergan and Forest acquisitions of $119.7 million and $44.9 million, respectively.
Unrecognized future stock-based compensation expense was $736.9 million as of March 31, 2016, including $263.6 million from the Allergan Acquisition and $92.7 million from the Forest Acquisition. This amount will be recognized as an expense over a remaining weighted average period of 1.7 years. Stock-based compensation is being amortized and charged to operations over the same period as the restrictions are eliminated for the participants, which is generally on a straight-line basis.
25
The following is a summary of equity award activity for unvested restricted stock and stock units in the period from December 31, 2015 through March 31, 2016:
(in millions, except per share data) |
Shares |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Remaining Contractual Term (Years) |
|
|
Aggregate Grant Date Fair Value |
|
||||
Restricted shares / units outstanding at December 31, 2015 |
|
2.0 |
|
|
$ |
209.90 |
|
|
|
1.7 |
|
|
$ |
419.8 |
|
Granted |
|
0.5 |
|
|
|
284.49 |
|
|
|
|
|
|
|
142.2 |
|
Vested |
|
(0.5 |
) |
|
|
(136.69 |
) |
|
|
|
|
|
|
(68.3 |
) |
Forfeited |
* |
|
|
|
(220.98 |
) |
|
|
|
|
|
|
(3.1 |
) |
|
Restricted shares / units outstanding at March 31, 2016 |
|
2.0 |
|
|
$ |
245.30 |
|
|
|
1.9 |
|
|
$ |
490.6 |
|
* |
Forfeited non-qualified options in the three months ended March 31, 2016 were approximately 14,000 shares/units. |
The following is a summary of equity award activity for non-qualified options to purchase ordinary shares in the period from December 31, 2015 through March 31, 2016:
(in millions, except per share data) |
Options |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Term (Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding, December 31, 2015 |
|
10.5 |
|
|
$ |
149.11 |
|
|
|
6.7 |
|
|
$ |
1,707.8 |
|
Granted |
|
0.2 |
|
|
|
283.70 |
|
|
|
|
|
|
|
|
|
Exercised |
|
(0.6 |
) |
|
|
(122.15 |
) |
|
|
|
|
|
|
|
|
Cancelled |
* |
|
|
|
(123.31 |
) |
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2016 |
|
10.1 |
|
|
$ |
112.80 |
|
|
|
6.5 |
|
|
$ |
1,561.5 |
|
Vested and expected to vest at March 31, 2016 |
|
9.5 |
|
|
$ |
111.47 |
|
|
|
6.5 |
|
|
$ |
1,481.4 |
|
* |
Forfeited non-qualified options in the three months ended March 31, 2016 were approximately 29,000 options. |
NOTE 8 — Reportable Segments
In the third quarter of 2015, there was a strategic shift in the business as a result of the Teva Transaction. The Company currently manages its continuing operations in the following segments: US Brands, US Medical Aesthetics, International Brands and Anda Distribution. Beginning in the second quarter of 2016, the Company will have four reporting segments. The first segment, US Specialized Therapeutics includes the U.S. Eye Care, Medical Aesthetics, Medical Dermatology and Botox Therapeutic. The second segment is the U.S. General Medicine unit, which includes Central Nervous System (“CNS”), Gastrointestinal, Women’s Health and Anti-Infective therapeutic areas. The third segment is the Company’s International unit. The fourth segment is the Company’s distribution business, Anda Distribution. In addition, certain revenues and shared costs and the results of corporate initiatives are managed outside of the four segments. Prior period results have been recast to align to the current segment presentation.
The operating segments are organized as follows:
|
· |
The US Brands segment includes sales and expenses relating to branded products within the United States, including certain Botox® therapies. |
|
· |
The US Medical Aesthetics segment includes sales and expenses relating to aesthetics and dermatology products within the United States, including certain Botox® therapies. |
|
· |
The International Brands segment includes sales and expenses relating to products sold outside of the United States. |
26
|
and physicians’ offices. The Anda Distribution segment operating results exclude sales of products developed, acquired, or licensed by the US Brands, US Medical Aesthetics and International Brands segments. As the generics business is now reported within Discontinued Operations, the Anda Distribution segment includes revenues and expenses related to Company manufactured generics products sold through Anda. |
The Company evaluates segment performance based on segment contribution. Segment contribution for segments represents net revenues less cost of sales (defined below), selling and marketing expenses, and select general and administrative expenses. The Company does not evaluate the following items at the segment level:
|
· |
Revenues and operating expenses within cost of sales, selling and marketing expenses, and general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs. |
|
· |
General and administrative expenses that result from shared infrastructure, including certain expenses located within the United States. |
|
· |
Total assets including capital expenditures. |
|
· |
Other select revenues and operating expenses including R&D expenses, amortization, IPR&D impairments and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments. |
The Company defines segment net sales as product sales and other revenue derived from branded products or licensing agreements. In March 2015, as a result of the Allergan Acquisition, we began to promote Restasis®, Lumigan®/Ganfort®, Alphagan®/Combigan®, Botox®, fillers, other aesthetic products and other eye care products.
In the quarter ended March 31, 2016, the Company changed its measure of segment cost of sales. Cost of sales within segment contribution now includes standard production and packaging costs for the products we manufacture, third party acquisition costs for products manufactured by others, profit-sharing or royalty payments for products sold pursuant to licensing agreements and finished goods inventory reserve charges. Cost of sales included within segment contribution does not include non-standard production costs, such as non-finished goods inventory obsolescence charges, manufacturing variances and excess capacity utilization charges, where applicable. Cost of sales does not include amortization or impairment costs for acquired product rights or other acquired intangibles.
Selling and marketing expenses consist mainly of personnel-related costs, product promotion costs, distribution costs, professional service costs, insurance, depreciation and travel costs.
General and administrative expenses consist mainly of personnel-related costs, facilities costs, transaction costs, insurance, depreciation, litigation and settlement costs and professional services costs which are general in nature and attributable to the segment.
27
Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, 2016 |
|
|||||||||||||||||
|
|
US |
|
|
US Medical |
|
|
International |
|
|
Anda |
|
|
|
|
|
||||
|
|
Brands |
|
|
Aesthetics |
|
|
Brands |
|
|
Distribution |
|
|
Total |
|
|||||
Net revenues |
|
$ |
2,302.7 |
|
|
$ |
449.7 |
|
|
$ |
673.3 |
|
|
$ |
364.7 |
|
|
$ |
3,790.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
259.4 |
|
|
|
30.9 |
|
|
|
99.2 |
|
|
|
302.9 |
|
|
|
692.4 |
|
Selling and marketing |
|
|
431.9 |
|
|
|
110.0 |
|
|
|
187.3 |
|
|
|
28.8 |
|
|
|
758.0 |
|
General and administrative |
|
|
68.1 |
|
|
|
13.3 |
|
|
|
27.6 |
|
|
|
10.2 |
|
|
|
119.2 |
|
Segment Contribution |
|
$ |
1,543.3 |
|
|
$ |
295.5 |
|
|
$ |
359.2 |
|
|
$ |
22.8 |
|
|
$ |
2,220.8 |
|
Contribution margin |
|
|
67.0 |
% |
|
|
65.7 |
% |
|
|
53.3 |
% |
|
|
6.3 |
% |
|
|
58.6 |
% |
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375.1 |
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
403.1 |
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,592.1 |
|
In-process research and development impairments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.0 |
|
Asset sales and impairments, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.7 |
) |
Operating (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(153.8 |
) |
Operating margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.1 |
)% |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results. |
|
|
Three Months Ended March 31, 2015 |
|
|||||||||||||||||
|
|
US |
|
|
US Medical |
|
|
International |
|
|
Anda |
|
|
|
|
|
||||
|
|
Brands |
|
|
Aesthetics |
|
|
Brands |
|
|
Distribution |
|
|
Total |
|
|||||
Net revenues |
|
$ |
1,809.2 |
|
|
$ |
79.8 |
|
|
$ |
118.7 |
|
|
$ |
554.3 |
|
|
$ |
2,562.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
218.2 |
|
|
|
4.5 |
|
|
|
23.7 |
|
|
|
473.5 |
|
|
|
719.9 |
|
Selling and marketing |
|
|
372.3 |
|
|
|
13.8 |
|
|
|
42.3 |
|
|
|
37.6 |
|
|
|
466.0 |
|
General and administrative |
|
|
58.5 |
|
|
|
2.7 |
|
|
|
7.4 |
|
|
|
10.8 |
|
|
|
79.4 |
|
Segment Contribution |
|
$ |
1,160.2 |
|
|
$ |
58.8 |
|
|
$ |
45.3 |
|
|
$ |
32.4 |
|
|
$ |
1,296.7 |
|
Contribution margin |
|
|
64.1 |
% |
|
|
73.7 |
% |
|
|
38.2 |
% |
|
|
5.8 |
% |
|
|
50.6 |
% |
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
864.3 |
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
317.7 |
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
787.8 |
|
In-process research and development impairments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Asset sales and impairments, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6 |
|
Operating (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(677.7 |
) |
Operating margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26.5 |
)% |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results. |
The following is a reconciliation of net revenues for the operating segments to the Company’s net revenues for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Segment net revenues |
|
$ |
3,790.4 |
|
|
$ |
2,562.0 |
|
Corporate revenues |
|
|
5.5 |
|
|
|
0.6 |
|
Net revenues |
|
$ |
3,795.9 |
|
|
$ |
2,562.6 |
|
28
No other country represents ten percent or more of net revenues outside of the United States. The US Brands, US Medical Aesthetics, and Anda Distribution segments are comprised solely of sales within the United States.
The following tables present global net revenues for the top products of the Company for the three months ended March 31, 2016 and 2015 ($ in millions):
|
Three Months Ended March 31, |
|
|||||||||||||||||||
|
Global |
|
U.S. |
|
International |
|
|||||||||||||||
|
2016 |
|
|
2015 |
|
2016 |
|
|
2015 |
|
2016 |
|
|
2015 |
|
||||||
Botox® |
$ |
637.5 |
|
|
$ |
84.0 |
|
$ |
455.5 |
|
|
$ |
60.7 |
|
$ |
182.0 |
|
|
$ |
23.3 |
|
Restasis® |
|
313.7 |
|
|
|
29.9 |
|
|
298.7 |
|
|
|
28.7 |
|
|
15.0 |
|
|
|
1.2 |
|
Fillers |
|
214.7 |
|
|
|
24.6 |
|
|
114.1 |
|
|
|
12.8 |
|
|
100.6 |
|
|
|
11.8 |
|
Namenda XR® |
|
173.1 |
|
|
|
150.6 |
|
|
173.1 |
|
|
|
150.6 |
|
|
- |
|
|
|
- |
|
Lumigan®/Ganfort® |
|
169.6 |
|
|
|
21.2 |
|
|
81.5 |
|
|
|
8.1 |
|
|
88.1 |
|
|
|
13.1 |
|
Bystolic® |
|
164.0 |
|
|
|
164.1 |
|
|
163.6 |
|
|
|
163.7 |
|
|
0.4 |
|
|
|
0.4 |
|
Linzess®/Constella® |
|
140.9 |
|
|
|
96.2 |
|
|
137.1 |
|
|
|
95.5 |
|
|
3.8 |
|
|
|
0.7 |
|
Alphagan®/Combigan® |
|
126.7 |
|
|
|
16.0 |
|
|
84.9 |
|
|
|
10.1 |
|
|
41.8 |
|
|
|
5.9 |
|
Asacol®/Delzicol® |
|
121.2 |
|
|
|
149.2 |
|
|
105.9 |
|
|
|
132.0 |
|
|
15.3 |
|
|
|
17.2 |
|
Lo Loestrin® |
|
89.3 |
|
|
|
83.3 |
|
|
89.3 |
|
|
|
82.7 |
|
|
- |
|
|
|
0.6 |
|
Viibryd®/Fetzima® |
|
83.3 |
|
|
|
79.6 |
|
|
83.3 |
|
|
|
79.6 |
|
|
- |
|
|
|
- |
|
Estrace® Cream |
|
80.7 |
|
|
|
71.9 |
|
|
80.7 |
|
|
|
71.9 |
|
|
- |
|
|
|
- |
|
Minastrin® 24 |
|
80.4 |
|
|
|
65.4 |
|
|
79.6 |
|
|
|
64.8 |
|
|
0.8 |
|
|
|
0.6 |
|
Silicone Implants |
|
67.4 |
|
|
|
9.4 |
|
|
33.9 |
|
|
|
2.4 |
|
|
33.5 |
|
|
|
7.0 |
|
Carafate®/Sulcrate® |
|
61.5 |
|
|
|
53.6 |
|
|
61.0 |
|
|
|
53.6 |
|
|
0.5 |
|
|
|
- |
|
Ozurdex® |
|
60.5 |
|
|
|
7.0 |
|
|
19.4 |
|
|
|
2.7 |
|
|
41.1 |
|
|
|
4.3 |
|
Aczone® |
|
33.0 |
|
|
|
6.0 |
|
|
33.0 |
|
|
|
6.0 |
|
|
- |
|
|
|
- |
|
Namenda® IR |
|
5.8 |
|
|
|
245.4 |
|
|
5.8 |
|
|
|
245.4 |
|
|
- |
|
|
|
- |
|
Other Products Revenues |
|
807.9 |
|
|
|
650.9 |
|
|
657.5 |
|
|
|
618.3 |
|
|
150.4 |
|
|
|
32.6 |
|
Total Products Revenues |
|
3,431.2 |
|
|
|
2,008.3 |
|
|
2,757.9 |
|
|
|
1,889.6 |
|
|
673.3 |
|
|
|
118.7 |
|
ANDA Revenues |
|
364.7 |
|
|
|
554.3 |
|
|
364.7 |
|
|
|
554.3 |
|
|
- |
|
|
|
- |
|
Total Net Revenues |
$ |
3,795.9 |
|
|
$ |
2,562.6 |
|
$ |
3,122.6 |
|
|
$ |
2,443.9 |
|
$ |
673.3 |
|
|
$ |
118.7 |
|
No other product represents ten percent or more of total net revenues.
The following table presents net revenues for the US Brands segment for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Central Nervous System (CNS) |
|
$ |
554.3 |
|
|
$ |
548.4 |
|
Eyecare |
|
|
533.0 |
|
|
|
94.7 |
|
Gastroenterology (GI) |
|
|
403.6 |
|
|
|
366.6 |
|
Women's Health |
|
|
263.7 |
|
|
|
229.3 |
|
Urology |
|
|
74.1 |
|
|
|
37.3 |
|
Infectious Disease |
|
|
51.5 |
|
|
|
41.9 |
|
Other(1) |
|
|
422.5 |
|
|
|
491.0 |
|
Total US Brands Net Revenues |
|
$ |
2,302.7 |
|
|
$ |
1,809.2 |
|
(1) |
The Company previously reported its cardiovascular franchise separately. The cardiovascular franchise is now being reported in Other. Sales of cardiovascular products were $163.6 million and $163.7 million in the three months ended March 31, 2016 and 2015, respectively. |
29
The following table presents revenues for the US Medical Aesthetics segment for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Facial Aesthetics |
|
$ |
279.4 |
|
|
$ |
35.2 |
|
Medical Dermatology and Other |
|
|
122.2 |
|
|
|
30.5 |
|
Plastic Surgery |
|
|
48.1 |
|
|
|
14.1 |
|
Total US Medical Net Revenues |
|
$ |
449.7 |
|
|
$ |
79.8 |
|
The following table presents net revenues for the International Brands segment for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Eyecare |
|
$ |
291.5 |
|
|
$ |
40.5 |
|
Facial Aesthetics |
|
|
205.5 |
|
|
|
24.8 |
|
Other Therapeutics |
|
|
139.5 |
|
|
|
45.6 |
|
Plastic Surgery |
|
|
36.8 |
|
|
|
7.8 |
|
Total International Brands Net Revenues |
|
$ |
673.3 |
|
|
$ |
118.7 |
|
NOTE 9 — Inventories
Inventories consist of finished goods held for sale and distribution, raw materials and work-in-process. Inventories are stated at the lower of cost (first-in, first-out method) or market (net realizable value). The Company writes down inventories to net realizable value based on forecasted demand, market conditions or other factors, which may differ from actual results.
Inventories consisted of the following ($ in millions):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
Raw materials |
|
$ |
284.1 |
|
|
$ |
242.3 |
|
Work-in-process |
|
|
104.9 |
|
|
|
149.7 |
|
Finished goods |
|
|
741.1 |
|
|
|
706.3 |
|
|
|
|
1,130.1 |
|
|
|
1,098.3 |
|
Less: inventory reserves |
|
|
107.9 |
|
|
|
88.6 |
|
Total Inventories |
|
$ |
1,022.2 |
|
|
$ |
1,009.7 |
|
As of March 31, 2016, finished goods included a de minimis amount related to the fair-value step-up of acquired inventory. Included in finished goods was $46.1 million related to the fair-value step-up of acquired inventory as of December 31, 2015.
30
NOTE 10 — Investments and Other Assets
Investments in marketable securities, other investments and other assets consisted of the following ($ in millions):
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
||
Marketable securities: |
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities — maturing within one year |
|
$ |
13.0 |
|
|
$ |
9.3 |
|
Total marketable securities |
|
$ |
13.0 |
|
|
$ |
9.3 |
|
Investments and other assets: |
|
|
|
|
|
|
|
|
Legacy Allergan deferred executive compensation investments |
|
$ |
107.6 |
|
|
$ |
118.1 |
|
Equity method investments |
|
|
15.4 |
|
|
|
17.3 |
|
Cost method investments |
|
|
16.7 |
|
|
|
16.7 |
|
Other long-term investments |
|
|
67.3 |
|
|
|
78.2 |
|
Taxes receivable |
|
|
49.7 |
|
|
|
39.6 |
|
Other assets |
|
|
148.8 |
|
|
|
148.0 |
|
Total investments and other assets |
|
$ |
405.5 |
|
|
$ |
417.9 |
|
The Company’s marketable securities and other long-term investments are classified as available-for-sale and are recorded at fair value based on quoted market prices using the specific identification method. These investments are classified as either current or non-current, as appropriate, in the Company’s consolidated balance sheets.
NOTE 11 — Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following ($ in millions):
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
||
Accrued expenses: |
|
|
|
|
|
|
|
|
Accrued third-party rebates |
|
$ |
1,502.7 |
|
|
$ |
1,281.6 |
|
Accrued payroll and related benefits |
|
|
376.9 |
|
|
|
409.7 |
|
Current portion of contingent consideration obligations |
|
|
306.1 |
|
|
|
79.9 |
|
Accrued returns |
|
|
298.0 |
|
|
|
288.4 |
|
Accrued R&D expenditures |
|
|
272.5 |
|
|
|
384.1 |
|
Litigation-related reserves and legal fees |
|
|
262.7 |
|
|
|
213.5 |
|
Accrued pharmaceutical fees |
|
|
209.0 |
|
|
|
162.2 |
|
Interest payable |
|
|
197.7 |
|
|
|
312.0 |
|
Royalties payable |
|
|
109.9 |
|
|
|
126.9 |
|
Accrued non-provision taxes |
|
|
102.8 |
|
|
|
100.3 |
|
Accrued selling and marketing expenditures |
|
|
98.3 |
|
|
|
127.2 |
|
Accrued severance, retention and other shutdown costs |
|
|
80.8 |
|
|
|
110.4 |
|
Dividends payable |
|
|
24.1 |
|
|
|
23.9 |
|
Other accrued expenses |
|
|
409.6 |
|
|
|
360.0 |
|
Total accrued expenses |
|
$ |
4,251.1 |
|
|
$ |
3,980.1 |
|
Accounts payable |
|
|
450.0 |
|
|
|
369.4 |
|
Total Accounts Payable and Accrued Expenses |
|
$ |
4,701.1 |
|
|
$ |
4,349.5 |
|
31
NOTE 12 — Goodwill, Product Rights and Other Intangible Assets
Goodwill for the Company’s segments consisted of the following ($ in millions):
|
|
US Brands |
|
|
US Medical Aesthetics |
|
|
International Brands |
|
|
Anda Distribution |
|
|
Total |
|
|||||
Balance as of December 31, 2015 |
|
$ |
36,107.5 |
|
|
$ |
4,006.7 |
|
|
$ |
6,351.0 |
|
|
$ |
86.3 |
|
|
$ |
46,551.5 |
|
Foreign exchange and other adjustments |
|
|
(26.6 |
) |
|
|
- |
|
|
|
199.1 |
|
|
|
- |
|
|
|
172.5 |
|
Balance as of March 31, 2016 |
|
$ |
36,080.9 |
|
|
$ |
4,006.7 |
|
|
$ |
6,550.1 |
|
|
$ |
86.3 |
|
|
$ |
46,724.0 |
|
As of March 31, 2016 and December 31, 2015, the gross balance of goodwill, pre-impairments, was $46,741.3 million and $46,568.8 million, respectively. Goodwill in discontinued operations was $6,092.7 million and $6,009.7 million as of March 31, 2016 and December 31, 2015, respectively.
Product rights and other intangible assets consisted of the following ($ in millions):
Cost Basis |
|
Balance as of December 31, 2015 |
|
|
Acquisitions |
|
|
Impairments |
|
|
IPR&D to CMP Transfers |
|
|
Disposals/ Held for Sale/ Other |
|
|
Foreign Currency Translation |
|
|
Balance as of March 31, 2016 |
|
|||||||
Intangibles with definite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product rights and other related intangibles |
|
$ |
64,544.2 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,130.0 |
|
|
$ |
(15.0 |
) |
|
$ |
208.1 |
|
|
$ |
65,867.3 |
|
Trade name |
|
|
690.0 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
690.0 |
|
Total definite-lived intangible assets |
|
$ |
65,234.2 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,130.0 |
|
|
$ |
(15.0 |
) |
|
$ |
208.1 |
|
|
$ |
66,557.3 |
|
Intangibles with indefinite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IPR&D |
|
$ |
11,128.2 |
|
|
$ |
- |
|
|
$ |
(6.0 |
) |
|
$ |
(1,130.0 |
) |
|
$ |
- |
|
|
$ |
24.3 |
|
|
$ |
10,016.5 |
|
Trade name |
|
|
76.2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
76.2 |
|
Total indefinite-lived intangible assets |
|
$ |
11,204.4 |
|
|
$ |
- |
|
|
$ |
(6.0 |
) |
|
$ |
(1,130.0 |
) |
|
$ |
- |
|
|
$ |
24.3 |
|
|
$ |
10,092.7 |
|
Total product rights and related intangibles |
|
$ |
76,438.6 |
|
|
$ |
- |
|
|
$ |
(6.0 |
) |
|
$ |
- |
|
|
$ |
(15.0 |
) |
|
$ |
232.4 |
|
|
$ |
76,650.0 |
|
Accumulated Amortization |
|
Balance as of December 31, 2015 |
|
|
Amortization |
|
|
Impairments |
|
|
IPR&D to CMP Transfers |
|
|
Disposals/ Held for Sale/ Other |
|
|
Foreign Currency Translation |
|
|
Balance as of March 31, 2016 |
|
|||||||
Intangibles with definite lives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product rights and other related intangibles |
|
$ |
(8,447.4 |
) |
|
$ |
(1,572.7 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(15.2 |
) |
|
$ |
(10,035.3 |
) |
Trade name |
|
|
(59.5 |
) |
|
|
(19.4 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(78.9 |
) |
Total definite-lived intangible assets |
|
$ |
(8,506.9 |
) |
|
$ |
(1,592.1 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(15.2 |
) |
|
$ |
(10,114.2 |
) |
Total product rights and related intangibles |
|
$ |
(8,506.9 |
) |
|
$ |
(1,592.1 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(15.2 |
) |
|
$ |
(10,114.2 |
) |
Net Product Rights and Other Intangibles |
|
$ |
67,931.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
66,535.8 |
|
32
Assuming no additions, disposals or adjustments are made to the carrying values and/or useful lives of the intangible assets, annual amortization expense on product rights and other related intangibles as of March 31, 2016 over the remainder of 2016 and each of the next five years is estimated to be as follows ($ in millions):
|
|
Amortization Expense |
|
|
2016 remaining |
|
$ |
4,801.8 |
|
2017 |
|
$ |
6,409.8 |
|
2018 |
|
$ |
5,934.2 |
|
2019 |
|
$ |
5,857.4 |
|
2020 |
|
$ |
5,606.2 |
|
2021 |
|
$ |
4,737.5 |
|
The above amortization expense is an estimate. Actual amounts may change from such estimated amounts due to fluctuations in foreign currency exchange rates, additional intangible asset acquisitions, finalization of preliminary fair value estimates, potential impairments, accelerated amortization or other events.
33
NOTE 13 — Long-Term Debt and Capital Leases
Total debt and capital leases consisted of the following ($ in millions):
|
|
Balance As of |
|
|
Fair Market Value As of |
|
||||||||||
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
||||
Senior Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating Rate Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$500.0 million floating rate notes due September 1, 2016 |
|
$ |
500.0 |
|
|
$ |
500.0 |
|
|
$ |
500.7 |
|
|
$ |
500.5 |
|
$500.0 million floating rate notes due March 12, 2018 |
|
|
500.0 |
|
|
|
500.0 |
|
|
|
502.8 |
|
|
|
499.6 |
|
$500.0 million floating rate notes due March 12, 2020 |
|
|
500.0 |
|
|
|
500.0 |
|
|
|
497.5 |
|
|
|
496.2 |
|
|
|
|
1,500.0 |
|
|
|
1,500.0 |
|
|
|
1,501.0 |
|
|
|
1,496.3 |
|
Fixed Rate Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$800.0 million 5.750% notes due April 1, 2016 |
|
|
800.0 |
|
|
|
800.0 |
|
|
|
800.0 |
|
|
|
808.4 |
|
$1,000.0 million 1.850% notes due March 1, 2017 |
|
|
1,000.0 |
|
|
|
1,000.0 |
|
|
|
1,004.5 |
|
|
|
1,001.5 |
|
$500.0 million 1.300% notes due June 15, 2017 |
|
|
500.0 |
|
|
|
500.0 |
|
|
|
498.6 |
|
|
|
496.3 |
|
$1,200.0 million 1.875% notes due October 1, 2017 |
|
|
1,200.0 |
|
|
|
1,200.0 |
|
|
|
1,205.4 |
|
|
|
1,196.0 |
|
$3,000.0 million 2.350% notes due March 12, 2018 |
|
|
3,000.0 |
|
|
|
3,000.0 |
|
|
|
3,035.9 |
|
|
|
3,004.6 |
|
$250.0 million 1.350% notes due March 15, 2018 |
|
|
250.0 |
|
|
|
250.0 |
|
|
|
248.2 |
|
|
|
244.9 |
|
$1,050.0 million 4.375% notes due February 1, 2019 |
|
|
1,050.0 |
|
|
|
1,050.0 |
|
|
|
1,113.9 |
|
|
|
1,099.5 |
|
$500.0 million 2.450% notes due June 15, 2019 |
|
|
500.0 |
|
|
|
500.0 |
|
|
|
506.9 |
|
|
|
494.4 |
|
$400.0 million 6.125% notes due August 14, 2019 |
|
|
400.0 |
|
|
|
400.0 |
|
|
|
450.7 |
|
|
|
444.2 |
|
$3,500.0 million 3.000% notes due March 12, 2020 |
|
|
3,500.0 |
|
|
|
3,500.0 |
|
|
|
3,584.7 |
|
|
|
3,505.1 |
|
$650.0 million 3.375% notes due September 15, 2020 |
|
|
650.0 |
|
|
|
650.0 |
|
|
|
675.5 |
|
|
|
656.6 |
|
$750.0 million 4.875% notes due February 15, 2021 |
|
|
750.0 |
|
|
|
750.0 |
|
|
|
827.9 |
|
|
|
807.4 |
|
$1,200.0 million 5.000% notes due December 15, 2021 |
|
|
1,200.0 |
|
|
|
1,200.0 |
|
|
|
1,333.3 |
|
|
|
1,299.4 |
|
$3,000.0 million 3.450% notes due March 15, 2022 |
|
|
3,000.0 |
|
|
|
3,000.0 |
|
|
|
3,105.0 |
|
|
|
3,006.8 |
|
$1,700.0 million 3.250% notes due October 1, 2022 |
|
|
1,700.0 |
|
|
|
1,700.0 |
|
|
|
1,739.6 |
|
|
|
1,669.6 |
|
$350.0 million 2.800% notes due March 15, 2023 |
|
|
350.0 |
|
|
|
350.0 |
|
|
|
345.7 |
|
|
|
327.7 |
|
$1,200.0 million 3.850% notes due June 15, 2024 |
|
|
1,200.0 |
|
|
|
1,200.0 |
|
|
|
1,254.5 |
|
|
|
1,202.6 |
|
$4,000.0 million 3.800% notes due March 15, 2025 |
|
|
4,000.0 |
|
|
|
4,000.0 |
|
|
|
4,166.0 |
|
|
|
3,984.6 |
|
$2,500.0 million 4.550% notes due March 15, 2035 |
|
|
2,500.0 |
|
|
|
2,500.0 |
|
|
|
2,585.2 |
|
|
|
2,462.2 |
|
$1,000.0 million 4.625% notes due October 1, 2042 |
|
|
1,000.0 |
|
|
|
1,000.0 |
|
|
|
1,031.3 |
|
|
|
956.1 |
|
$1,500.0 million 4.850% notes due June 15, 2044 |
|
|
1,500.0 |
|
|
|
1,500.0 |
|
|
|
1,602.1 |
|
|
|
1,483.6 |
|
$2,500.0 million 4.750% notes due March 15, 2045 |
|
|
2,500.0 |
|
|
|
2,500.0 |
|
|
|
2,648.7 |
|
|
|
2,452.7 |
|
|
|
|
32,550.0 |
|
|
|
32,550.0 |
|
|
|
33,763.6 |
|
|
|
32,604.2 |
|
Total Senior Notes Gross |
|
|
34,050.0 |
|
|
|
34,050.0 |
|
|
|
35,264.6 |
|
|
|
34,100.5 |
|
Unamortized premium |
|
|
205.1 |
|
|
|
225.9 |
|
|
|
- |
|
|
|
- |
|
Unamortized discount |
|
|
(104.6 |
) |
|
|
(107.4 |
) |
|
|
- |
|
|
|
- |
|
Total Senior Notes Net |
|
|
34,150.5 |
|
|
|
34,168.5 |
|
|
|
35,264.6 |
|
|
|
34,100.5 |
|
Term Loan Indebtedness: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WC Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WC Three Year Tranche variable rate debt maturing October 1, 2016 |
|
|
191.5 |
|
|
|
191.5 |
|
|
|
|
|
|
|
|
|
WC Five Year Tranche variable rate debt maturing October 1, 2018** |
|
|
181.1 |
|
|
|
498.8 |
|
|
|
|
|
|
|
|
|
|
|
|
372.6 |
|
|
|
690.3 |
|
|
|
|
|
|
|
|
|
ACT Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Term Loan variable rate debt maturing October 31, 2017** |
|
|
358.8 |
|
|
|
572.1 |
|
|
|
|
|
|
|
|
|
2019 Term Loan variable rate debt maturing July 1, 2019** |
|
|
1,650.0 |
|
|
|
1,700.0 |
|
|
|
|
|
|
|
|
|
|
|
|
2,008.8 |
|
|
|
2,272.1 |
|
|
|
|
|
|
|
|
|
AGN Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AGN Three Year Tranche variable rate debt maturing March 17, 2018 |
|
|
2,750.0 |
|
|
|
2,750.0 |
|
|
|
|
|
|
|
|
|
AGN Five Year Tranche variable rate debt maturing March 17, 2020** |
|
|
2,475.0 |
|
|
|
2,543.8 |
|
|
|
|
|
|
|
|
|
|
|
|
5,225.0 |
|
|
|
5,293.8 |
|
|
|
|
|
|
|
|
|
Total Term Loan Indebtedness |
|
|
7,606.4 |
|
|
|
8,256.2 |
|
|
|
|
|
|
|
|
|
Other Indebtedness |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolver Borrowings |
|
|
900.0 |
|
|
|
200.0 |
|
|
|
|
|
|
|
|
|
Debt Issuance Costs |
|
|
(185.6 |
) |
|
|
(195.8 |
) |
|
|
|
|
|
|
|
|
Other |
|
|
93.0 |
|
|
|
97.4 |
|
|
|
|
|
|
|
|
|
Total Other Borrowings |
|
|
807.4 |
|
|
|
101.6 |
|
|
|
|
|
|
|
|
|
Capital Leases |
|
|
3.2 |
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
Total Indebtedness |
|
$ |
42,567.5 |
|
|
$ |
42,530.4 |
|
|
|
|
|
|
|
|
|
** |
The indebtedness requires a quarterly repayment of 2.5%. |
34
Fair market value in the table above is determined in accordance with ASC Topic 820 “Fair Value Measurement” (“ASC 820”) under Level 2 based upon quoted prices for similar items in active markets. The book value of the outstanding term loan indebtedness approximates fair value as the debt is at variable interest rates and re-prices frequently.
Unless otherwise indicated, the remaining loan balances after the quarterly required payments are due upon maturity.
Floating Rate Notes
On March 4, 2015, Actavis Funding SCS, a limited partnership (société en commandite simple) organized under the laws of the Grand Duchy of Luxembourg and an indirect wholly-owned subsidiary of Allergan plc, issued floating rate notes due 2016 (the “2016 Floating Rate Notes”), floating rate notes due 2018 (the “2018 Floating Rate Notes”), floating rate notes due 2020 (the “2020 Floating Rate Notes”), 1.850% notes due 2017 (the “1.850% 2017 Notes”), 2.350% notes due 2018 (the “2.350% 2018 Notes”), 3.000% notes due 2020 (the “3.000% 2020 Notes”), 3.450% notes due 2022 (the “3.450% 2022 Notes”), 3.800% notes due 2025 (the “3.800% 2025 Notes”), 4.550% notes due 2035 (the “4.550% 2035 Notes”) and 4.750% notes due 2045 (the “4.750% 2045 Notes”). The notes are fully and unconditionally guaranteed by Actavis Funding SCS’s indirect parents, Warner Chilcott Limited and Actavis Capital S.a.r.l. (“Actavis Capital”), and by Actavis, Inc., a subsidiary of Actavis Capital, on an unsecured and unsubordinated basis. Allergan plc has not guaranteed the notes.
The 2016 Floating Rate Notes, the 2018 Floating Rate Notes and the 2020 Floating Rate Notes bear interest at a floating rate equal to three-month LIBOR plus 0.875%, 1.080% and 1.255% per annum, respectively. Interest on the 2016 Floating Rate Notes is payable quarterly on March 1, June 1, September 1 and December 1 of each year, and began on June 1, 2015. Interest on the 2018 Floating Rate Notes and the 2020 Floating Rate Notes is payable quarterly on March 12, June 12, September 12 and December 12 of each year, and began on June 12, 2015.
Fixed Rate Notes
The Company has issued fixed rate notes over multiple issuances for various business needs. Interest on the various notes is generally payable semi-annually with various payment dates.
Acquired Allergan Notes
On March 17, 2015 in connection with the Allergan Acquisition, the Company acquired, and subsequently guaranteed, along with Warner Chilcott Limited, the indebtedness of Allergan, Inc. comprised of the $350.0 million 2.800% senior notes due 2023, the $650.0 million 3.375% senior notes due 2020, the $250.0 million 1.350% senior notes due 2018 and the $800.0 million 5.750% senior notes due 2016. Interest payments are due on the $350.0 million senior notes semi-annually on the principal amount of the notes at a rate of 2.80% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption, if the redemption occurs prior to December 15, 2022 (three months prior to the maturity of the 2023 senior notes). If the redemption occurs on or after December 15, 2022, then such redemption is not subject to the make-whole provision. Interest payments are due on the $650.0 million senior notes semi-annually on the principal amount of the notes at a rate of 3.375% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. Interest payments are due on the $250.0 million senior notes semi-annually on the principal amount of the notes at a rate of 1.350% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. Interest payments are due on the $800.0 million senior notes semi-annually on the principal amount of the notes at a rate of 5.750% per annum, and were redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. The fair value of the acquired senior notes was determined to be $2,087.5 million as of March 17, 2015. As such, as part of acquisition accounting, the company recorded a premium of $37.5 million to be amortized as contra interest over the life of the notes.
The $800.0 million 5.750% senior notes were paid in full on April 1, 2016 with proceeds from the $900.0 million of borrowings under the revolving credit facility.
Credit Facility Indebtedness
WC Term Loan
On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a second amendment agreement (the “WC Term Loan Amendment”) among Allergan plc, Warner Chilcott Limited, Warner Chilcott Finance, LLC, Actavis WC 2 S.à r.l. (“Actavis WC 2”), Warner Chilcott Company, LLC (“WCCL”), Warner Chilcott Corporation (“WC Corporation” and together with Actavis WC
35
2 and WCCL, the “WC Borrowers”), Bank of America, N.A. (“BofA”), as administrative agent, and the lenders party thereto. The WC Term Loan Amendment amends and restates Allergan plc’s existing amended and restated WC term loan credit and guaranty agreement, dated as of June 9, 2014 (such agreement, prior to its amendment and restatement pursuant to the WC Term Loan Amendment, the “2014 WC Term Loan”), among the WC Borrowers, Allergan plc, Warner Chilcott Limited, Warner Chilcott Finance, LLC, the lenders from time to time party thereto and BofA, as administrative agent, which amended and restated Allergan plc’s existing WC term loan credit and guaranty agreement, dated as of August 1, 2013 (such agreement, prior to its amendment and restatement pursuant to the 2014 WC Term Loan Amendment, the “Existing WC Term Loan”) among the WC Borrowers, Warner Chilcott Finance, LLC, Actavis Limited, BofA, as administrative agent and a syndicate of banks participating as lenders.
Pursuant to the Existing WC Term Loan, on October 1, 2013 (the “WC Closing Date”), the lenders party thereto provided term loans in a total aggregate principal amount of $2.0 billion, comprised of (i) a $1.0 billion tranche that will mature on October 1, 2016 (the “WC Three Year Tranche”) and (ii) a $1.0 billion tranche that will mature on October 1, 2018 (the “WC Five Year Tranche”). The proceeds of borrowings under the Existing WC Term Loan Agreement, together with $41.0 million of cash on hand, were used to finance the repayment in full of all amounts outstanding under Warner Chilcott’s then-existing Credit Agreement, dated as of March 17, 2011, as amended by Amendment No. 1 on August 20, 2012, among the WC Borrowers, Warner Chilcott Holdings Company III, Limited, BofA, as administrative agent and a syndicate of banks participating as lenders. In the three months ended March 31, 2016, the Company prepaid $311.7 million of WC Term Loan indebtedness.
Borrowings under the WC Term Loan Agreement bear interest at the applicable borrower’s choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from (x) 0.00% per annum to 0.75% per annum under the WC Three Year Tranche and (y) 0.125% per annum to 0.875% per annum under the WC Five Year Tranche, depending on the publicly announced debt ratings for non-credit-enhanced, senior unsecured long-term indebtedness of Allergan plc (such applicable debt rating the “Debt Rating”) or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 1.75% per annum under the WC Three Year Tranche and (y) 1.125% per annum to 1.875% per annum under the WC Five Year Tranche, depending on the Debt Rating. The outstanding principal amount of loans under the WC Three Year Tranche is not subject to quarterly amortization and shall be payable in full on the three year anniversary of the WC Closing Date. The outstanding principal amount of loans under the WC Five Year Tranche is payable in equal quarterly amounts of 2.50% per quarter prior to the fifth anniversary of the WC Closing Date, with the remaining balance payable on the fifth year anniversary of the WC Closing Date.
The Company is subject to, and, at March 31, 2016, was in compliance with, all financial and operational covenants under the terms of the WC Term Loan.
ACT Term Loan
On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a third amendment agreement (the “ACT Term Loan Amendment”) among Allergan plc, Warner Chilcott Limited, Actavis Capital, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent, and the lenders party thereto. The ACT Term Loan Amendment amends and restates Allergan plc’s existing second amended and restated Allergan term loan credit and guaranty agreement, dated as of March 31, 2014 (such agreement, prior to its amendment and restatement pursuant to the ACT Term Loan Amendment, the “2014 ACT Term Loan Agreement” and together with the Existing ACT Term Loan Agreement (defined below), the “ACT Term Loan”) among Actavis Capital, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent, and the lenders from time to time party thereto, which amended and restated Allergan plc’s existing amended and restated Allergan term loan credit and guaranty agreement, dated as of October 1, 2013 (such agreement, prior to its amendment and restatement pursuant to the ACT Term Loan Amendment, the “Existing ACT Term Loan Agreement”) among Actavis Capital, Allergan plc, Actavis, Inc., BofA, as administrative agent, and the lenders from time to time party thereto.
The Existing ACT Term Loan Agreement amended and restated Actavis, Inc.’s $1,800.0 million senior unsecured term loan credit facility, dated as of June 22, 2012. At the closing of the Existing ACT Term Loan Agreement, an aggregate principal amount of $1,572.5 million was outstanding (the “2017 Term Loan”). The 2017 Term Loan matures on October 31, 2017. The outstanding principal amount of the 2017 Term Loan is payable in equal quarterly installments of 2.50% per quarter, with the remaining balance payable on the maturity date. In the three months ended March 31, 2016, the Company prepaid $200.0 million of ACT Term Loan indebtedness.
On March 31, 2014, Allergan plc, Actavis Capital, Actavis, Inc., BofA, as Administrative Agent, and a syndicate of banks participating as lenders entered into the 2014 ACT Term Loan Agreement to amend and restate the Existing ACT Term Loan Agreement. On July 1, 2014, in connection with the Forest Acquisition, the Company borrowed $2.0 billion of term loan indebtedness under tranche A-2 of the 2014 ACT Term Loan Agreement, which is due July 1, 2019 (the “2019 Term Loan”). The outstanding principal amount of the 2019 Term Loan is payable in equal quarterly installments of 2.50% per quarter, with the remaining balance payable on the maturity date.
36
The ACT Term Loan provides that loans thereunder will bear interest, at the Company’s choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from (x) 0.00% per annum to 1.00% per annum with respect to the 2017 term-loan and (y) 0.125% per annum to 0.875% per annum with respect to the 2019 term-loan, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 2.00% per annum with respect to the 2017 term-loan and (y) 1.125% per annum to 1.875% per annum with respect to the 2019 term-loan, depending on the Debt Rating.
The Company is subject to, and at March 31, 2016 was in compliance with, all financial and operational covenants under the terms of the ACT Term Loan.
AGN Term Loan
On December 17, 2014, Allergan, Inc. and certain of its subsidiaries entered into a senior unsecured term loan credit agreement (the “AGN Term Loan”), among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Term Lenders”), JPMorgan Chase Bank, N.A. (“JPMCB”), as administrative agent and the other financial institutions party thereto. Under the AGN Term Loan, the Term Lenders provided (i) a $2.75 billion tranche maturing on March 17, 2018 (the “AGN Three Year Tranche”) and (ii) a $2.75 billion tranche and maturing on March 17, 2020 (the “AGN Five Year Tranche”). The proceeds of borrowings under the AGN Term Loan were to be used to finance, in part, the cash component of the Allergan Acquisition consideration and certain fees and expenses incurred in connection with the Allergan Acquisition.
Borrowings under the AGN Term Loan bear interest at our choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from (x) 0.00% per annum to 1.00% per annum under the AGN Three Year Tranche and (y) 0.125% per annum to 1.250%% per annum under the AGN Five Year Tranche, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 2.00% per annum under the AGN Three Year Tranche and (y) 1.125% per annum to 2.250% per annum under the AGN Five Year Tranche, depending on the Debt Rating. The outstanding principal amount of loans under the AGN Three Year Tranche is not subject to quarterly amortization and shall be payable in full on the maturity date. The outstanding principal amount of loans under the AGN Five Year Tranche is payable in equal quarterly amounts of 2.50% per quarter prior to March 17, 2020, with the remaining balance payable on March 17, 2020.
The obligations of Actavis Capital under the Term Loan Credit Agreement are guaranteed by Warner Chilcott Limited, Actavis, Inc. and Actavis Funding SCS and will be guaranteed by any subsidiary of Allergan plc (other than Actavis Capital or a direct subsidiary of Allergan plc) that becomes a guarantor of third party indebtedness in an aggregate principal amount exceeding $350.0 million (unless, in the case of a foreign subsidiary, such guarantee would give rise to adverse tax consequences as reasonably determined by Allergan plc).
Cash Bridge Loan Facility
On March 11, 2015, Allergan and certain of its subsidiaries entered into a 60-day senior unsecured bridge credit agreement (the “Cash Bridge Loan Facility”), among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Cash Bridge Lenders”), JPMCB, as administrative agent and the other financial institutions party thereto. Under the Cash Bridge Loan Facility, the Cash Bridge Lenders committed to provide, subject to certain conditions, unsecured bridge financing, of which $2.8 billion was drawn to finance the Allergan Acquisition on March 17, 2015. The outstanding balance of the Cash Bridge Loan Facility was repaid on April 9, 2015.
Borrowings under the Cash Bridge Loan Facility bore interest at our choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from 0.00% per annum to 1.00% per annum, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 1.00% per annum to 2.00% per annum, depending on the Debt Rating.
Revolving Credit Facility
On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a revolving credit loan and guaranty agreement (the “Revolver Agreement”) among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Revolving Lenders”), JPMCB as administrative agent, J.P. Morgan Europe Limited, as London agent, and the other financial institutions party thereto. Under the Revolver Agreement, the Revolving Lenders have committed to provide an unsecured revolving credit facility in an aggregate principal amount of up to $1.0 billion. The Revolver Agreement replaced Allergan plc’s existing $750.0 million second amended and restated Actavis revolving credit and guaranty agreement dated as of June 30, 2014 (the “Existing Revolver”) among Actavis Capital, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent and the lenders from time to time party thereto.
37
The Revolver Agreement provides that loans thereunder will bear interest, at our choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from 0.00% per annum to 1.00% per annum depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 0.875% per annum to 2.00% per annum depending on the Debt Rating. Additionally, to maintain availability of funds, the Company pays an unused commitment fee, which according to the pricing grid is set at 0.075% to 0.250% per annum, depending on the Debt Rating, of the unused portion of the revolver. The Revolving Credit Agreement will mature on December 17, 2019.
The obligations under the Revolver Agreement are guaranteed by Allergan plc, Warner Chilcott Limited, Actavis, Inc. and Actavis Funding SCS and will be guaranteed by any subsidiary of Allergan (other than Actavis Capital) that becomes a guarantor of third party indebtedness in an aggregate principal amount exceeding $350.0 million (unless, in the case of a foreign subsidiary, such guarantee would give rise to adverse tax consequences as reasonably determined by Allergan plc).
The Company is subject to, and as March 31, 2016 was in compliance with, all financial and operational covenants under the terms of the Revolving Credit Facility. At March 31, 2016, there were $900.0 million of outstanding borrowings under the Revolving Credit Facility and letters of credit outstanding were $28.8 million. The net availability under the Revolving Credit Facility was $71.2 million. The Company repaid $425.0 million of indebtedness under the Revolving Credit Facility in April 2016.
Annual Debt Maturities
As of March 31, 2016, annual debt maturities were as follows ($ in millions):
|
|
Total Payments |
|
|
2016 remaining |
|
$ |
1,905.7 |
|
2017 |
|
|
3,522.3 |
|
2018 |
|
|
7,129.7 |
|
2019 |
|
|
3,325.0 |
|
2020 |
|
|
6,093.8 |
|
2021 |
|
|
1,950.0 |
|
2022 and after |
|
|
17,729.9 |
|
|
|
$ |
41,656.4 |
|
Capital leases |
|
|
3.2 |
|
Revolving credit facility |
|
|
900.0 |
|
Debt issuance costs |
|
|
(185.6 |
) |
Other short-term borrowings |
|
|
93.0 |
|
Unamortized premium |
|
|
205.1 |
|
Unamortized discount |
|
|
(104.6 |
) |
Total Indebtedness |
|
$ |
42,567.5 |
|
Amounts represent total anticipated cash payments assuming scheduled repayments.
NOTE 14 — Other Long-Term Liabilities
Other long-term liabilities consisted of the following ($ in millions):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2016 |
|
|
2015 |
|
||
Acquisition related contingent consideration liabilities |
|
$ |
559.5 |
|
|
$ |
788.1 |
|
Long-term pension and post retirement liability |
|
|
224.7 |
|
|
|
222.1 |
|
Legacy Allergan deferred executive compensation |
|
|
106.9 |
|
|
|
117.9 |
|
Long-term severance and restructuring liabilities |
|
|
35.9 |
|
|
|
34.9 |
|
Product warranties |
|
|
28.0 |
|
|
|
28.4 |
|
Long-term contractual obligations |
|
|
25.6 |
|
|
|
26.4 |
|
Deferred revenue |
|
|
13.3 |
|
|
|
18.2 |
|
Other long-term liabilities |
|
|
30.1 |
|
|
|
26.0 |
|
Total other long-term liabilities |
|
$ |
1,024.0 |
|
|
$ |
1,262.0 |
|
38
NOTE 15 – Income Taxes
The Company’s effective tax rate for the three months ended March 31, 2016 was 83.2% compared to 24.8% for the three months ended March 31, 2015. The effective tax rate for the three months ended March 31, 2016 was impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate and U.S. losses tax benefited at rates greater than the Irish statutory rate. Additionally, the tax benefit for the three months ended March 31, 2016 included an expense of $124.3 million for the change in a valuation allowance on a portion of U.S. capital loss carryforwards resulting from restructuring associated with the sale of the global generics business and a benefit of $32.2 million for the recognition of previously unrecognized tax benefits. The Company also recorded a $20.0 million out of period tax benefit related to the prior year during the three months ended March 31, 2016. The amount was not considered material to any of the relevant periods. The effective tax rate for the three months ended March 31, 2015 was impacted by income earned in low tax jurisdictions and U.S. losses tax benefited at rates greater than the Irish statutory rate. The increase in the effective tax rate for the period ended March 31, 2016 as compared to the period ended March 31, 2015 is the result of changes in the mix of income and losses in jurisdictions with rates other than the Irish statutory rate.
The Company conducts business globally and, as a result, it files U.S. federal, state and foreign tax returns. The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for amounts it believes are in accordance with the accounting standard, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the condensed consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations with tax authorities, identification of new issues and issuance of new legislation, regulations or case law.
Due to our numerous acquisitions, the Company has several concurrent audits still pending with the IRS as set forth below:
IRS Audits |
|
Tax Years |
Actavis, Inc. (fka Watson Pharmaceuticals, Inc.) |
|
2008, 2009, 2010 and 2011 |
Actavis Inc. |
|
2009, 2010, 2011 and 2012 |
Warner Chilcott Corporation |
|
2010, 2011 and 2012 |
Forest Laboratories, Inc. |
|
2007, 2008 and 2009 |
Aptalis Holdings, Inc. |
|
2013 |
Durata Therapeutics Inc. |
|
2012 |
Allergan, Inc. |
|
2009 and 2010 |
NOTE 16 — Shareholders’ Equity
A summary of the changes in shareholders’ equity for the three months March 31, 2016 consisted of the following ($ in millions):
|
|
Allergan plc |
|
|
Shareholders’ equity as of December 31, 2015 |
|
$ |
76,591.4 |
|
Increase in additional paid in capital for share-based compensation plans |
|
|
99.0 |
|
Net income attributable to ordinary shareholders |
|
|
186.1 |
|
Proceeds from stock plans |
|
|
69.6 |
|
Excess tax benefit from employee stock plans |
|
|
34.6 |
|
Repurchase of ordinary shares |
|
|
(53.2 |
) |
Other comprehensive income |
|
|
522.5 |
|
Shareholders’ equity as of March 31, 2016 |
|
$ |
77,450.0 |
|
|
|
Warner Chilcott Limited |
|
|
Members' equity as of December 31, 2015 |
|
$ |
75,573.7 |
|
Net income attributable to members |
|
|
270.9 |
|
Dividend to Parent |
|
|
(69.6 |
) |
Other comprehensive income |
|
|
522.5 |
|
Members' equity as of March 31, 2016 |
|
$ |
76,297.5 |
|
39
Accumulated Other Comprehensive Income / (Loss)
For most of the Company’s international operations, the local currency has been determined to be the functional currency. The results of its non-U.S. dollar based operations are translated to U.S. dollars at the average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transaction. Translation adjustments are reflected in shareholders’ equity and are included as a component of other comprehensive income / (loss). The effects of converting non-functional currency assets and liabilities into the functional currency are recorded as transaction gains/losses in general and administrative expenses in the consolidated statements of operations.
The movements in accumulated other comprehensive income / (loss) for the three months ended March 31, 2016 were as follows ($ in millions):
|
|
Foreign Currency Translation Items |
|
|
Unrealized (losses) net of tax |
|
|
Total Accumulated Other Comprehensive Income / (Loss) |
|
|||
Balance as of December 31, 2015 |
|
$ |
(564.3 |
) |
|
$ |
70.2 |
|
|
$ |
(494.1 |
) |
Other comprehensive gain / (loss) before reclassifications into general and administrative |
|
|
542.8 |
|
|
|
(20.3 |
) |
|
|
522.5 |
|
Total other comprehensive income / (loss) |
|
|
542.8 |
|
|
|
(20.3 |
) |
|
|
522.5 |
|
Balance as of March 31, 2016 |
|
$ |
(21.5 |
) |
|
$ |
49.9 |
|
|
$ |
28.4 |
|
The movements in accumulated other comprehensive income / (loss) for the three months ended March 31, 2015 were as follows ($ in millions):
|
|
Foreign Currency Translation Items |
|
|
Unrealized gains net of tax |
|
|
Total Accumulated Other Comprehensive Income / (Loss) |
|
|||
Balance as of December 31, 2014 |
|
$ |
(434.4 |
) |
|
$ |
(31.0 |
) |
|
$ |
(465.4 |
) |
Other comprehensive (loss) before reclassifications into general and administrative |
|
|
(313.9 |
) |
|
|
(4.0 |
) |
|
|
(317.9 |
) |
Total other comprehensive (loss) |
|
|
(313.9 |
) |
|
|
(4.0 |
) |
|
|
(317.9 |
) |
Balance as of March 31, 2015 |
|
$ |
(748.3 |
) |
|
$ |
(35.0 |
) |
|
$ |
(783.3 |
) |
NOTE 17 — Derivative Instruments and Hedging Activities
The Company’s revenue, earnings, cash flows and fair value of its assets and liabilities can be impacted by fluctuations in foreign exchange risks and interest rates, as applicable. The Company manages the impact of foreign exchange risk and interest rate movements through operational means and through the use of various financial instruments, including derivative instruments such as foreign currency derivatives.
Foreign Currency Derivatives
Overall, the Company is a net recipient of currencies other than the U.S. dollar and, as such, benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may negatively affect the Company’s consolidated revenues and favorably impact operating expenses in U.S. dollars.
The Company enters into foreign currency derivatives to reduce current and future earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on its core business issues. Accordingly, the Company enters into various contracts which change in value as foreign exchange rates change to economically offset the effect of changes in the value of foreign currency assets and liabilities, commitments and anticipated foreign currency denominated sales and operating
40
expenses. The Company enters into foreign currency derivatives in amounts between minimum and maximum anticipated foreign exchange exposures. The Company does not designate the current derivative instruments as accounting hedges.
The Company uses foreign currency derivatives, which provide for the sale or purchase or the option to sell or purchase foreign currencies to economically hedge the currency exchange risks associated with probable but not firmly committed transactions that arise in the normal course of the Company’s business. Probable but not firmly committed transactions are comprised primarily of sales of products and purchases of raw material in currencies other than the U.S. dollar. The foreign currency derivatives are entered into to reduce the volatility of earnings generated in currencies other than the U.S. dollar. While these instruments are subject to fluctuations in value, such fluctuations are anticipated to offset changes in the value of the underlying exposures.
The Company recognized realized and unrealized losses on such contracts of $14.7 million and $12.8 million during the three months ended March 31, 2016 and 2015, respectively.
The fair value of outstanding foreign currency derivatives are recorded in “Prepaid expenses and other current assets” or “Investments and other assets” or “Accounts payable and accrued expenses.” At March 31, 2016 and December 31, 2015, foreign currency derivative assets associated with the foreign exchange option contracts of $16.9 million and $25.0 million, respectively, were included in “Prepaid expenses and other current assets.” At March 31, 2016 and December 31, 2015, foreign currency derivative assets associated with the foreign exchange option contracts of $42.0 million and $48.5 million, respectively, were included in “Investments and other assets.” At March 31, 2016 and December 31, 2015, there were no net foreign currency derivative liabilities associated with the foreign exchange forward contracts included in “Accounts payable and accrued expenses.”
NOTE 18 — Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. Fair values determined based on Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined based on Level 2 inputs utilize observable quoted prices for similar assets and liabilities in active markets and observable quoted prices for identical or similar assets in markets that are not very active. Fair values determined based on Level 3 inputs utilize unobservable inputs and include valuations of assets or liabilities for which there is little, if any, market activity. A financial asset or liability’s classification within the above hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Assets and liabilities measured at fair value or disclosed at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 consisted of the following (in millions):
|
|
Fair Value Measurements as of March 31, 2016 Using: |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
$ |
13.0 |
|
|
$ |
13.0 |
|
|
$ |
- |
|
|
$ |
- |
|
Deferred executive compensation investments |
|
|
107.6 |
|
|
|
94.4 |
|
|
|
13.2 |
|
|
|
- |
|
Foreign currency derivatives |
|
|
58.9 |
|
|
|
- |
|
|
|
58.9 |
|
|
|
- |
|
Investments and other |
|
|
99.4 |
|
|
|
99.4 |
|
|
|
- |
|
|
|
- |
|
Total assets |
|
$ |
278.9 |
|
|
$ |
206.8 |
|
|
$ |
72.1 |
|
|
$ |
- |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred executive compensation liabilities |
|
|
106.9 |
|
|
|
93.7 |
|
|
|
13.2 |
|
|
|
- |
|
Contingent consideration obligations |
|
|
865.6 |
|
|
|
- |
|
|
|
- |
|
|
|
865.6 |
|
Total liabilities |
|
$ |
972.5 |
|
|
$ |
93.7 |
|
|
$ |
13.2 |
|
|
$ |
865.6 |
|
41
|
|
Fair Value Measurements as of December 31, 2015 Using: |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
$ |
29.9 |
|
|
$ |
29.9 |
|
|
$ |
- |
|
|
$ |
- |
|
Deferred executive compensation investments |
|
|
118.1 |
|
|
|
102.3 |
|
|
|
15.8 |
|
|
|
- |
|
Foreign currency derivatives |
|
|
73.5 |
|
|
|
- |
|
|
|
73.5 |
|
|
|
- |
|
Investments and other |
|
|
112.2 |
|
|
|
112.2 |
|
|
|
- |
|
|
|
- |
|
Total assets |
|
$ |
333.7 |
|
|
$ |
244.4 |
|
|
$ |
89.3 |
|
|
$ |
- |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred executive compensation liabilities |
|
|
117.9 |
|
|
|
102.1 |
|
|
|
15.8 |
|
|
|
- |
|
Contingent consideration obligations |
|
|
868.0 |
|
|
|
- |
|
|
|
- |
|
|
|
868.0 |
|
Total liabilities |
|
$ |
985.9 |
|
|
$ |
102.1 |
|
|
$ |
15.8 |
|
|
$ |
868.0 |
|
Marketable securities and investments consist of available-for-sale investments in U.S. treasury and agency securities and publicly traded equity securities for which market prices are readily available. Unrealized gains or losses on marketable securities and investments are recorded in accumulated other comprehensive income / (loss).
Foreign Currency Contracts
At March 31, 2016 and December 31, 2015, the notional principal and fair value of the Company’s outstanding foreign currency derivative financial instruments were as follows ($ in millions, except average contract rate or strike amount):
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
||||||||||
|
|
Notional Principal |
|
|
Average Contract Rate or Strike Amount |
|
|
Notional Principal |
|
|
Average Contract Rate or Strike Amount |
|
||||
Foreign currency forward exchange contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Receive U.S. dollar/pay foreign currency) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russian ruble |
|
$ |
19.9 |
|
|
|
68.98 |
|
|
$ |
18.8 |
|
|
|
72.97 |
|
|
|
$ |
19.9 |
|
|
|
|
|
|
$ |
18.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated fair value |
|
$ |
0.2 |
|
|
|
|
|
|
$ |
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency sold - put options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro |
|
$ |
317.6 |
|
|
1.41 |
|
|
$ |
340.5 |
|
|
1.41 |
|
||
|
|
$ |
317.6 |
|
|
|
|
|
|
$ |
340.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated fair value |
|
$ |
58.7 |
|
|
|
|
|
|
$ |
73.5 |
|
|
|
|
|
The notional principal amounts provide one measure of the transaction volume outstanding as of March 31, 2016 and December 31, 2015, and do not represent the amount of the Company’s exposure to market loss. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information as of March 31, 2016 and December 31, 2015. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
42
Contingent Consideration Obligations
The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs and is based on a probability-weighted income approach. The measurement is based upon unobservable inputs supported by little or no market activity based on our own assumptions. Changes in the fair value of the contingent consideration obligations, including accretion, are recorded in our consolidated statements of operations as follows ($ in millions):
|
|
Three Months Ended |
|
|||||
Expense / (income) |
|
March 31, 2016 |
|
|
March 31, 2015 |
|
||
Cost of sales |
|
$ |
7.8 |
|
|
$ |
27.7 |
|
Research and development |
|
|
25.9 |
|
|
|
- |
|
General and administrative |
|
|
(0.1 |
) |
|
|
1.1 |
|
Total |
|
$ |
33.6 |
|
|
$ |
28.8 |
|
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Balance as of December 31, 2015 |
|
|
Net transfers in to (out of) Level 3 |
|
|
Purchases and settlements, net |
|
|
Net accretion and fair value adjustments |
|
|
Foreign currency translation |
|
|
Balance as of March 31, 2016 |
|
||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration obligations |
|
$ |
868.0 |
|
|
$ |
- |
|
|
$ |
(35.1 |
) |
|
$ |
33.6 |
|
|
$ |
(0.9 |
) |
|
$ |
865.6 |
|
|
|
Balance as of December 31, 2014 |
|
|
Net transfers in to (out of) Level 3 |
|
|
Purchases and settlements, net |
|
|
Net accretion and fair value adjustments |
|
|
Foreign currency translation |
|
|
Balance as of March 31, 2015 |
|
||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration obligations |
|
$ |
373.8 |
|
|
$ |
- |
|
|
$ |
346.8 |
|
|
$ |
28.8 |
|
|
$ |
0.2 |
|
|
$ |
749.6 |
|
During the three months ended March 31, 2016, the following activity in contingent consideration obligations by acquisition was incurred ($ in millions):
|
|
Balance as of December 31, 2015 |
|
|
Acquisitions |
|
|
Fair Value Adjustments and Accretion |
|
|
Payments and Other |
|
|
Balance as of March 31, 2016 |
|
|||||
Medicines 360 acquisition |
|
$ |
144.1 |
|
|
$ |
- |
|
|
$ |
4.4 |
|
|
$ |
- |
|
|
$ |
148.5 |
|
Forest Acquisition |
|
|
20.4 |
|
|
|
- |
|
|
|
0.4 |
|
|
|
(0.1 |
) |
|
|
20.7 |
|
Durata Acquisition |
|
|
24.5 |
|
|
|
- |
|
|
|
2.2 |
|
|
|
(26.7 |
) |
|
|
- |
|
Metrogel acquisition |
|
|
30.9 |
|
|
|
- |
|
|
|
0.4 |
|
|
|
(7.5 |
) |
|
|
23.8 |
|
Uteron acquisition |
|
|
8.2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8.2 |
|
Allergan Acquisition |
|
|
329.7 |
|
|
|
- |
|
|
|
14.7 |
|
|
|
0.1 |
|
|
|
344.5 |
|
Oculeve Acquisition |
|
|
90.0 |
|
|
|
- |
|
|
|
1.5 |
|
|
|
- |
|
|
|
91.5 |
|
AqueSys Acquisition |
|
|
193.5 |
|
|
|
- |
|
|
|
9.7 |
|
|
|
- |
|
|
|
203.2 |
|
Other |
|
|
26.7 |
|
|
|
- |
|
|
|
0.3 |
|
|
|
(1.8 |
) |
|
|
25.2 |
|
Total |
|
$ |
868.0 |
|
|
$ |
- |
|
|
$ |
33.6 |
|
|
$ |
(36.0 |
) |
|
$ |
865.6 |
|
43
NOTE 19 — Business Restructuring Charges
During 2016, activity related to our business restructuring and facility rationalization activities primarily related to the cost optimization initiatives in conjunction with the Allergan Acquisition. Restructuring activities for the three months ended March 31, 2016 as follows ($ in millions):
|
|
Severance and Retention |
|
|
Share-Based Compensation |
|
|
Other |
|
|
Total |
|
||||
Reserve balance at December 31, 2015 |
|
$ |
96.7 |
|
|
$ |
- |
|
|
$ |
48.6 |
|
|
$ |
145.3 |
|
Charged to expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
2.2 |
|
|
|
0.1 |
|
|
|
0.6 |
|
|
|
2.9 |
|
Research and development |
|
|
2.5 |
|
|
|
0.9 |
|
|
|
0.7 |
|
|
|
4.1 |
|
Selling and marketing |
|
|
- |
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.3 |
|
General and administrative |
|
|
2.4 |
|
|
|
1.8 |
|
|
|
4.6 |
|
|
|
8.8 |
|
Total expense |
|
|
7.1 |
|
|
|
2.9 |
|
|
|
6.1 |
|
|
|
16.1 |
|
Cash payments |
|
|
(20.5 |
) |
|
|
- |
|
|
|
(21.3 |
) |
|
|
(41.8 |
) |
Other reserve impact |
|
|
- |
|
|
|
(2.9 |
) |
|
|
- |
|
|
|
(2.9 |
) |
Reserve balance at March 31, 2016 |
|
$ |
83.3 |
|
|
$ |
- |
|
|
$ |
33.4 |
|
|
$ |
116.7 |
|
During the three months ended March 31, 2016 and 2015, the Company recognized restructuring charges of $16.1 million and $509.6 million, respectively.
NOTE 20 – Commitments & Contingencies
The Company and its affiliates are involved in various disputes, governmental and/or regulatory inspections, inquires, investigations and proceedings, and litigation matters that arise from time to time in the ordinary course of business. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of operations, financial condition and cash flows. The Company’s general practice is to expense legal fees as services are rendered in connection with legal matters, and to accrue for liabilities when losses are probable and reasonably estimable.
The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued. As of March 31, 2016, the Company’s consolidated balance sheet includes accrued loss contingencies of approximately $335.0 million, of which approximately $125.0 million was cash settled in April of 2016, relating to the resolution with the federal government, as well as 50 states and the District of Columbia, concluding the previously disclosed federal investigation into certain sales and marketing practices involving several Warner Chilcott products during the time period January 2009 through March 2013.
The Company’s legal proceedings range from cases brought by a single plaintiff to mass tort actions and class actions with thousands of putative class members. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims (including, but not limited to, qui tam actions, antitrust, product liability, breach of contract, securities, patent infringement and trade practices), some of which present novel factual allegations and/or unique legal theories. In addition, a number of the matters pending against us are at very early stages of the legal process (which in complex proceedings of the sort faced by us often extend for several years). As a result, some matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to estimate a range of possible loss. In those proceedings in which plaintiffs do request publicly quantified amounts of relief, the Company does not believe that the quantified amounts are meaningful because they are merely stated jurisdictional limits, exaggerated and/or unsupported by the evidence or applicable burdens of proof.
Antitrust Litigation
Actos® Litigation. On December 31, 2013 two putative class actions, on behalf of putative classes of indirect purchaser plaintiffs, were filed in the federal court for the Southern District of New York against Actavis plc and certain of its affiliates alleging that Watson Pharmaceuticals, Inc.’s (“Watson” now known as Actavis, Inc.) 2010 patent lawsuit settlement with Takeda Pharmaceutical, Co. Ltd. related to Actos ® (pioglitazone hydrochloride and metformin “Actos ® “) is unlawful. Several additional complaints have also been filed. Plaintiffs then filed a consolidated, amended complaint on May 20, 2014. The amended complaint generally alleges an overall scheme that included Watson improperly delaying the launch of its generic version of Actos ® in exchange for substantial payments from Takeda in violation of federal and state antitrust and consumer protection laws. The complaint seeks declaratory and injunctive relief and unspecified damages. Defendants have moved to dismiss the amended complaint. On
44
September 23, 2015, the court granted the motion to dismiss the indirect purchasers’ complaint in its entirety. The indirect purchaser plaintiffs have appealed the dismissal of their complaint. In May 2015, two additional putative class action complaints, each of which makes similar allegations against the Company and Takeda, were filed by plaintiffs on behalf of a putative class of direct purchasers. Defendants have moved to dismiss the direct purchasers’ complaint.
AndroGel. The Company believes that it has substantial meritorious defenses to the claims alleged. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. AndroGel® Litigation. On January 29, 2009, the U.S. Federal Trade Commission and the State of California filed a lawsuit in federal district court in California alleging that the September 2006 patent lawsuit settlement between Watson and Solvay Pharmaceuticals, Inc. (“Solvay”), related to AndroGel ® 1% (testosterone gel) CIII is unlawful. The complaint generally alleged that Watson improperly delayed its launch of a generic version of AndroGel ® in exchange for Solvay’s agreement to permit Watson to co-promote AndroGel ® for consideration in excess of the fair value of the services provided by Watson, in violation of federal and state antitrust and consumer protection laws. The complaint sought equitable relief and civil penalties. On February 2 and 3, 2009, three separate lawsuits alleging similar claims were filed in federal district court in California by various private plaintiffs purporting to represent certain classes of similarly situated claimants. On April 8, 2009, the Court transferred the government and private cases to the United States District Court for the Northern District of Georgia. The FTC and the private plaintiffs filed amended complaints on May 28, 2009. The private plaintiffs amended their complaints to include allegations concerning conduct before the U.S. Patent and Trademark Office (the “USPTO”), conduct in connection with the listing of Solvay’s patent in the FDA “Orange Book,” and sham litigation. Additional actions alleging similar claims have been filed in various courts by other private plaintiffs purporting to represent certain classes of similarly situated direct or indirect purchasers of AndroGel ® . The Judicial Panel on Multidistrict Litigation (“JPML”) transferred all federal court actions then pending outside of Georgia to that district. The district court then granted the Company’s motion to dismiss all claims except the private plaintiffs’ sham litigation claims. After the dismissal was upheld by the Eleventh Circuit Court of Appeals, the FTC petitioned the United States Supreme Court to hear the case. On June 17, 2013, the Supreme Court issued a decision, holding that the settlements between brand and generic drug companies which include a payment from the brand company to the generic competitor must be evaluated under a “rule of reason” standard of review and ordered the case remanded (the “Supreme Court AndroGel Decision”). The case is now back in the district court in Georgia. On August 5, 2014 the indirect purchaser plaintiffs filed an amended complaint which the Company answered on September 15, 2014.
The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Asacol® Litigation. On June 22, 2015, two class action complaints were filed in federal court in Massachusetts on behalf of a putative class of indirect purchasers. In each complaint plaintiffs allege that they paid higher prices for Warner Chilcott’s Asacol ® HD and Delzicol ® products as a result of Warner Chilcott’s alleged actions preventing or delaying generic competition in the market for Warner Chilcott’s older Asacol ® product in violation of U.S. federal antitrust laws and/or state laws. Plaintiffs seek unspecified injunctive relief, treble damages and/or attorneys’ fees. All of the actions were consolidated in the federal district court. On September 21, 2015, three additional complaints were filed on behalf of putative classes of indirect purchasers, each raising similar allegations to the complaints filed in June 2015. Defendants have moved to dismiss the indirect purchasers’ complaint. Oral argument on the motion is scheduled for May 11, 2016. On April 26, 2016, a direct purchaser, Meijer, Inc., filed a complaint in federal court in New York. The direct purchaser complaint makes similar allegations to the complaints filed by the indirect purchaser plaintiffs. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Botox® Litigation. On February 24, 2015, a class action complaint was filed in federal court in California. The complaint alleges unlawful market allocation in violation of Section 1 of the Sherman Act, 15 U.S.C. §1, agreement in restraint of trade in violation of 15 U.S.C. §1 of the Sherman Act, unlawful maintenance of monopoly market power in violation of Section 2 of the Sherman Act, 15 U.S.C. §2 of the Sherman Act, violations of California’s Cartwright Act, Section 16700 et seq. of Calif. Bus. and Prof. Code., and violations of California’s unfair competition law, Section 17200 et seq. of Calif. Bus. and Prof. Code. Plaintiffs filed an amended complaint on May 29, 2015. On June 29, 2015, the Company filed a motion to dismiss the complaint. On October 20, 2015, the Court denied the Company’s motion to dismiss the complaint. On December 18, 2015, plaintiffs filed a motion for partial judgment on the pleadings or, in the alternative, for partial summary judgment or adjudication. The Company filed a response to the motion for judgment on the pleadings on February 11, 2016. The court held oral argument on plaintiff’s motion on March 4, 2016 and took the matter under submission. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
45
Cipro® Litigation. Beginning in July 2000, a number of suits were filed against Watson and certain Company affiliates including The Rugby Group, Inc. (“Rugby”) in various state and federal courts alleging claims under various federal and state competition and consumer protection laws. The actions generally allege that the defendants engaged in unlawful, anticompetitive conduct in connection with alleged agreements, entered into prior to Watson’s acquisition of Rugby from Sanofi Aventis (“Sanofi”), related to the development, manufacture and sale of the drug substance ciprofloxacin hydrochloride, the generic version of Bayer’s brand drug, Cipro ® . The actions generally seek declaratory judgment, damages, injunctive relief, restitution and other relief on behalf of certain purported classes of individuals and other entities. While many of these actions have been dismissed, actions remain pending in various state courts, including California, Kansas, Tennessee, and Florida. There has been activity in Tennessee and Florida since 2003. In the action pending in Kansas, plaintiffs’ motion for class certification has been fully briefed. In the action pending in the California state court, following the decision from the United States Supreme Court in the Federal Trade Commission v. Actavis matter involving AndroGel ® , described above, Plaintiffs and Bayer announced that they reached an agreement to settle the claims pending against Bayer and Bayer has now been dismissed from the action. Plaintiffs are continuing to pursue claims against the generic defendants, including Watson and Rugby. The remaining parties submitted letter briefs to the court regarding the impact of the Supreme Court AndroGel Decision and on May 7, 2015, the California Supreme Court issued a ruling, consistent with the Supreme Court AndroGel Decision discussed above, that the settlements between brand and generic drug companies which include a payment from the brand company to the generic competitor must be evaluated under a “rule of reason” standard of review.
In addition to the pending actions, the Company understands that various state and federal agencies are investigating the allegations made in these actions. Sanofi has agreed to defend and indemnify Watson and its affiliates in connection with the claims and investigations arising from the conduct and agreements allegedly undertaken by Rugby and its affiliates prior to Watson’s acquisition of Rugby, and is currently controlling the defense of these actions.
Doryx® Litigation. In July 2012, Mylan Pharmaceuticals Inc. (“Mylan”) filed a complaint against Warner Chilcott and Mayne Pharma International Pty. Ltd. (“Mayne”) in federal court in Pennsylvania alleging that Warner Chilcott and Mayne prevented or delayed Mylan’s generic competition to Warner Chilcott’s Doryx ® products in violation of U.S. federal antitrust laws and tortiously interfered with Mylan’s prospective economic relationships under Pennsylvania state law. In the complaint, Mylan seeks unspecified treble and punitive damages and attorneys’ fees. Following the filing of Mylan’s complaint, three putative class actions were filed against Warner Chilcott and Mayne by purported direct purchasers, and one putative class action was filed against by purported indirect purchasers. In addition, four retailers filed in the same court a civil antitrust complaint in their individual capacities against Warner Chilcott and Mayne regarding Doryx ® . In each of the class and individual cases the plaintiffs allege that they paid higher prices for Warner Chilcott’s Doryx ® products as a result of Warner Chilcott’s and Mayne’s alleged actions preventing or delaying generic competition in violation of U.S. federal antitrust laws and/or state laws. Plaintiffs seek unspecified injunctive relief, treble damages and/or attorneys’ fees. All of the actions were consolidated in the federal district court.
Warner Chilcott and Mayne’s motion to dismiss was denied without prejudice by the court in June 2013. Thereafter, Warner Chilcott and Mayne reached agreements to settle the claims of the Direct Purchaser Plaintiff class representatives, the Indirect Purchaser Plaintiff class representatives and each of the individual retailer plaintiffs. Warner Chilcott and Mylan filed motions for summary judgment on March 10, 2014. On April 16, 2015, the court issued an order granting Warner Chilcott and Mayne’s motion for summary judgment, denying Mylan’s summary judgment motion and entering judgment in favor of Warner Chilcott and Mayne on all counts. Mylan is appealing the district court’s decision to the Third Circuit Court of Appeals and the appeal is fully briefed. The date for oral argument on the appeal has not yet been set.
The Company intends to vigorously defend its rights in the litigations. However, it is impossible to predict with certainty the outcome of any litigation and whether any additional similar suits will be filed.
Lidoderm® Litigation. On November 8, 2013, a putative class action was filed in the federal district court against Actavis, Inc. and certain of its affiliates alleging that Watson’s 2012 patent lawsuit settlement with Endo Pharmaceuticals, Inc. related to Lidoderm® (lidocaine transdermal patches, “Lidoderm®”) is unlawful. The complaint, asserted on behalf of putative classes of direct purchaser plaintiffs, generally alleges that Watson improperly delayed launching generic versions of Lidoderm® in exchange for substantial payments from Endo in violation of federal and state antitrust and consumer protection laws. The complaint seeks declaratory and injunctive relief and damages. Additional lawsuits containing similar allegations have followed on behalf of other classes of putative direct purchasers and suits have been filed on behalf of putative classes of end-payer plaintiffs. The Company anticipates additional claims or lawsuits based on the same or similar allegations may be filed. On April 3, 2014 the JPML consolidated the cases in federal district court in California. Defendants filed motions to dismiss each of the plaintiff classes’ claims. On November 17, 2014, the court issued an order granting the motion in part but denying it with respect to the claims under Section 1 of the Sherman Act. Plaintiffs then filed an amended, consolidated complaint on December 19, 2014. Defendants have responded to the amended consolidated complaint. On March 5, 2015, a group of five retailers filed a civil antitrust complaint in their individual capacities regarding Lidoderm® in the same court where it was consolidated with the direct and indirect purchaser class complaints. The retailer complaint recites similar facts and asserts similar legal claims for relief to those asserted in the related cases described above. The five retailers
46
amended their complaint on July 27, 2015. On March 30, 2016, the U.S. Federal Trade Commission filed a lawsuit in federal district court in the Eastern District of Pennsylvania against the company, one of its Global Generics business subsidiaries, Watson Laboratories, Inc., Endo Pharmaceuticals Inc. and others arising out of patent settlements relating to Lidoderm and Opana ER (generic oxymorphone extended release tablets). The Lidoderm settlement was reached by Endo Pharmaceuticals Inc. and Watson Laboratories, Inc. in May 2012, and all allegations against the Company and Watson Laboratories, Inc. relate to the Lidoderm settlement only. The FTC action as to Watson Laboratories, Inc. parallels the allegations contained in the private litigation, and seeks monetary and equitable relief.
The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Loestrin® 24 Litigation. On April 5, 2013, two putative class actions were filed in the federal district court against Actavis, Inc. and certain affiliates alleging that Watson’s 2009 patent lawsuit settlement with Warner Chilcott related to Loestrin ® 24 Fe (norethindrone acetate/ethinyl estradiol tablets and ferrous fumarate tablets, “Loestrin ® 24”) is unlawful. The complaints, both asserted on behalf of putative classes of end-payors, generally allege that Watson and another generic manufacturer improperly delayed launching generic versions of Loestrin ® 24 in exchange for substantial payments from Warner Chilcott, which at the time was an unrelated company, in violation of federal and state antitrust and consumer protection laws. The complaints each seek declaratory and injunctive relief and damages. Additional complaints have been filed by different plaintiffs seeking to represent the same putative class of end-payors. In addition to the end-payor suits, two lawsuits have been filed on behalf of a class of direct payors. The Company anticipates additional claims or lawsuits based on the same or similar allegations. After a hearing on September 26, 2013, the JPML issued an order transferring all related Loestrin ® 24 cases to the federal court for the District of Rhode Island. On September 4, 2014, the court granted the defendants’ motion to dismiss the complaint. The plaintiffs appealed the district court’s decision to the First Circuit Court of Appeals and oral argument was held on December 7, 2015. On February 22, 2016 the First Circuit issued its decision vacating the decision of, and remanding the matter to, the district court.
The Company believes it has substantial meritorious defenses and intends to defend itself vigorously including in the appeal of the district court’s decision granting the Company’s motion to dismiss. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Namenda® Litigation. On September 15, 2014, the State of New York, through the Office of the Attorney General of the State of New York, filed a lawsuit in the United States District Court for the Southern District of New York alleging that Forest is acting to prevent or delay generic competition to Forest’s immediate-release product Namenda® in violation of federal and New York antitrust laws and committed other fraudulent acts in connection with its commercial plans for Namenda ® XR. In the complaint, the state seeks unspecified monetary damages and injunctive relief. On September 24, 2014, the state filed a motion for a preliminary injunction prohibiting Forest from discontinuing or otherwise limiting the availability of immediate-release Namenda® until the conclusion of the litigation. A hearing was held in November 2014 on the state’s preliminary injunction motion. On December 11, 2014, the district court issued a ruling granting the state’s injunction motion and issued an injunction on December 15, 2014. On May 22, 2015, the Court of Appeals for the Second Circuit affirmed the preliminary injunction. On June 5, 2015, Forest filed a petition with the Second Circuit for rehearing en banc which was denied. Forest and the New York Attorney General reached a settlement on November 24, 2015. On May 29, 2015, a putative class action was filed on behalf of a class of direct purchasers and on June 8, 2015 a similar putative class action was filed on behalf of a class of indirect purchasers. Since that time, additional complaints have been filed on behalf of putative classes of direct and indirect purchasers. The class action complaints make claims similar to those asserted by the New York Attorney General and also include claims that Namenda® patent litigation settlements between Forest and generic companies also violated the antitrust laws. On December 22, 2015, Forest and its co-defendants filed motions to dismiss the pending complaints of the putative classes of direct and indirect purchasers. These motions remain pending. The Company believes it has substantial meritorious defenses and intends to defend both its brand and generic defendant entities vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Zymar®/Zymaxid® Litigation. On February 16, 2012, Apotex Inc. and Apotex Corp. filed a complaint in the federal district court in Delaware against Senju Pharmaceuticals Co., Ltd. (“Senju”), Kyorin Pharmaceutical Co., Ltd. (“Kyorin”), and Allergan, Inc. (“Allergan”) alleging monopolization in violation of Section 2 of the Sherman Act, conspiracy to monopolize, and unreasonable restraint of trade in the market for gatifloxacin ophthalmic formulations, which includes Allergan’s ZYMAR ® gatifloxacin ophthalmic solution 0.3% and ZYMAXID ® gatifloxacin ophthalmic solution 0.5% products. On May 24, 2012, Allergan filed a motion to dismiss the complaint to the extent it seeks to impose liability for alleged injuries occurring prior to August 19, 2011, which is the date Apotex obtained final approval of its proposed generic product. Allergan and the other defendants also moved to dismiss. Defendants also filed a motion to stay the action pending resolution of related patent actions in the federal court in Delaware and in
47
the U.S. Court of Appeals for the Federal Circuit. On February 7, 2013, the court granted defendants’ motion to stay the proceedings pending resolution of the appeal in the patent dispute and denied the motion to dismiss without prejudice to renew. On September 18, 2014, defendants filed a new motion to dismiss the Apotex plaintiffs’ complaint. The court dismissed Allergan’s motion on May 2, 2015. Thereafter, Allergan filed an answer to Apotex’s complaint on June 1, 2015. On June 6, 2014, a separate antitrust class action complaint was filed in the federal district court in Delaware against the same defendants as in the Apotex case. The complaint alleges that defendants unlawfully excluded or delayed generic competition in the gatifloxacin ophthalmic formulations market (generic versions of ZYMAR ® and ZYMAXID ® ). On September 18, 2014, Allergan filed a motion to dismiss for lack of subject matter jurisdiction and joined in co-defendants’ motion to dismiss for failure to state a claim. On August 19, 2015, the court granted Allergan’s motion to dismiss. On September 18, 2015, plaintiff filed a notice of appeal with the U.S. Court of Appeals for the Third Circuit. Oral argument is scheduled for June 13, 2016. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Commercial Litigation
Celexa® /Lexapro® Class Actions. Forest and certain of its affiliates are defendants in three federal court actions filed on behalf of individuals who purchased Celexa ® and/or Lexapro ® for pediatric use, all of which have been consolidated for pretrial purposes in an MDL proceeding in the federal district court Massachusetts (the “Celexa ® /Lexapro ® MDL”). These actions, two of which were originally filed as putative nationwide class actions, and one of which is a putative California-wide class action, allege that Forest marketed Celexa ® and/or Lexapro ® for off-label pediatric use and paid illegal kickbacks to physicians to induce prescriptions of Celexa ® and Lexapro®. The complaints assert various similar claims, including claims under the state consumer protection statutes and state common laws. Plaintiffs in the various actions sought to have certified California, Missouri, Illinois and New York state-wide classes. However, only the Missouri state class was certified. Forest subsequently reached an agreement with the MDL plaintiffs to settle the Missouri class claims, including claims by both individuals and third party payors that purchased Celexa ® or Lexapro ® for use by a minor from 1998 to December 31, 2013, for $7.65 million with a potential to increase the amount to $10.35 million if settling plaintiffs meet certain thresholds. On September 8, 2014 the court granted final approval for the settlement.
Additional actions relating to the promotion of Celexa® and/or Lexapro® have been filed all of which have been consolidated in the Celexa ® /Lexapro ® MDL. On May 3, 2013, an action was filed in federal court in California on behalf of individuals who purchased Lexapro ® for adolescent use, seeking to certify a state-wide class action in California and alleging that our promotion of Lexapro ® for adolescent depression has been deceptive. On March 5, 2014 the court granted Forest’s motion to dismiss this complaint. Plaintiff then appealed the district court’s decision to the Court of Appeals for the First Circuit and on February 20, 2015, the First Circuit affirmed the dismissal of the complaint, ruling that Plaintiffs’ California state law claims were preempted by the Federal Food, Drug, and Cosmetic Act (FDCA). On November 13, 2013, an action was filed in federal court in Minnesota seeking to certify a nationwide class of third-party payor entities that purchased Celexa ® and Lexapro ® for pediatric use. The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa ® and Lexapro ® . Forest moved to dismiss the complaint and on December 12, 2014, the court issued a ruling dismissing plaintiff’s claims under Minnesota’s Deceptive Trade Practices Act, but denying the remaining portions of the motion. A hearing on plaintiff’s motion for class certification is scheduled for May 25, 2016. On March 13, 2014, an action was filed in the federal court in Massachusetts by two third-party payors seeking to certify a nationwide class of persons and entities that purchased Celexa ® and Lexapro ® for use by pediatric use. The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, state consumer protection statutes, and state common laws, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa ® and Lexapro®. The court granted Forest’s motion to dismiss this complaint in its December 12, 2014 ruling. On August 28, 2014, an action was filed in the federal district court in Washington seeking to certify a nationwide class of consumers and subclasses of Washington and Massachusetts consumers that purchased Celexa ® and Lexapro ® for pediatric use. The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, alleging that Forest engaged in off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa ® and Lexapro ® . Forest’s response to the complaint was filed on December 19, 2014. On June 16, 2015, the court issued a ruling on the motion to dismiss, granting it in part and denying it in part. Plaintiffs thereafter filed an amended complaint. Forest moved to dismiss the amended complaint.
Forest and certain of its affiliates are also named as defendants in two actions filed on behalf of entities or individuals who purchased or reimbursed certain purchases of Celexa ® and Lexapro ® for pediatric use pending in the Missouri state court. These claims arise from similar allegations as those contained in the federal actions described in the preceding paragraphs. One action, filed on November 6, 2009, was brought by two entities that purchased or reimbursed certain purchases of Celexa ® and/or Lexapro ® . The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees. The other action, filed on July 22, 2009, was filed as a putative class action on behalf of a class of Missouri citizens who purchased Celexa ® for pediatric use. The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees. In October 2010, the court certified a class of Missouri
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domiciliary citizens who purchased Celexa ® for pediatric use at any time prior to the date of the class certification order, but who do not have a claim for personal injury. The Company reached agreements with both sets of plaintiffs in the Missouri actions to resolve each matter for payments that are not material to our financial condition or results of operations.
The Company intends to continue to vigorously defend against these actions. At this time, the Company does not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.
Generic Drug Pricing Litigation. On March 2, 2016, a putative class action complaint was filed against Allergan plc and several other defendants in federal court in Pennsylvania on behalf of a putative class of direct and indirect purchasers of certain pharmaceutical products. Three additional indirect purchaser class action complaints were filed in the same court, two were filed on March 25, 2016 and one was filed on April 25, 2016. Each of the complaints allege that the defendants engaged in a conspiracy to fix, maintain and/or stabilize the prices of certain generic drug products. The Company intends to vigorously defend against this action. However, this action, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Telephone Consumer Protection Act Litigation. A putative class action complaint against Anda, Inc. (“Anda”), a subsidiary of the Company, was filed in Missouri state court alleging claims for conversion and alleged violations of the Telephone Consumer Protection Act (“TCPA”) and Missouri Consumer Fraud and Deceptive Business Practices Act. An amended complaint alleges that by sending unsolicited facsimile advertisements, Anda misappropriated the class members’ paper, toner, ink and employee time when they received the alleged unsolicited faxes, and that the alleged unsolicited facsimile advertisements were sent to the plaintiff in violation of the TCPA and Missouri Consumer Fraud and Deceptive Business Practices Act. The complaint seeks to assert class action claims on behalf of the plaintiff and other similarly situated third parties. On May 19, 2011, the plaintiff’s filed a motion seeking certification of a class of entities with Missouri telephone numbers who were sent Anda faxes for the period January 2004 through January 2008 but the court vacated the class certification hearing until the FCC Petition, described in more detail below, was addressed. On May 1, 2012, a separate action was filed in federal court in Florida, purportedly on behalf of the “end users of the fax numbers in the United States but outside Missouri to which faxes advertising pharmaceutical products for sale by Anda were sent.” On July 10, 2012, Anda filed its answer and affirmative defenses. The parties filed a joint motion to stay the action pending the resolution of the FCC Petition which the court granted. In addition, in October 2012, Forest and certain of its affiliates were named as defendants, in a putative class action in federal court in Missouri. This suit alleges that Forest and another defendant violated the TCPA and was filed on behalf of a proposed class that includes all persons who, from four years prior to the filing of the action, were sent telephone facsimile messages of material advertising the commercial availability of any property, goods, or services by or on behalf of defendants, which did not display an opt-out notice compliant with a certain regulation promulgated by the FCC. On July 17, 2013, the district court granted Forest’s motion to stay the action pending the administrative proceeding initiated by the pending FCC Petition and a separate petition Forest filed. On October 31, 2015, another class action complaint was filed in Missouri state court against Allergan USA, Inc., Warner Chilcott Corporation and Actavis, Inc. alleging violations of the Telephone Consumer Protection Act, the Missouri Consumer Fraud and Protection Act and conversion on behalf of a putative nationwide class of plaintiffs to who defendant Warner Chilcott Corporation sent unsolicited facsimile advertisements. Defendants removed this action to the federal district court for the Western District of Missouri on December 10, 2015 and responded to the complaint on February 8, 2016. On February 17, 2016, plaintiffs voluntarily dismissed defendants Allergan USA, Inc. and Actavis, Inc. from the litigation.
In a related matter, in November 2010 Anda filed a petition with the FCC, asking the FCC to clarify the statutory basis for its regulation requiring “opt-out” language on faxes sent with express permission of the recipient (the “FCC Petition”). On May 2, 2012, the Consumer & Governmental Affairs Bureau of the FCC dismissed the FCC Petition. On May 14, 2012, Anda filed an application for review of the Bureau’s dismissal by the full Commission, requesting the FCC to vacate the dismissal and grant the relief sought in the FCC Petition. The FCC did not rule on the application for review. On June 27, 2013, Forest filed a Petition for Declaratory Ruling with the FCC requesting that the FCC find that (1) the faxes at issue in the action complied, or substantially complied with the FCC regulation, and thus did not violate it, or (2) the FCC regulation was not properly promulgated under the TCPA. On January 31, 2014, the FCC issued a Public Notice seeking comment on several other recently-filed petitions, all similar to the one Anda filed in 2010. On October 30, 2014, the FCC issued a final order on the FCC Petition granting Anda, Forest and several other petitioners a retroactive waiver of the opt-out notice requirement for all faxes sent with express consent. The litigation plaintiffs, who had filed comments on the January 2014 Public Notice, have appealed the final order to the Court of Appeals for the District of Columbia. Anda, Forest and other petitioners have moved to intervene in the appeal seeking review of that portion of the FCC final order addressing the statutory basis for the opt out/express consent portion of the regulation.
Anda and Forest believe they have substantial meritorious defenses to the putative class actions brought under the TCPA, and intend to defend the actions vigorously. However, these actions, if successful, could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
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Prescription Drug Abuse Litigation. On May 21, 2014, the California counties Santa Clara and Orange filed a lawsuit in California state court on behalf of the State of California against several pharmaceutical manufacturers. Plaintiffs named Actavis plc in the suit. The California plaintiffs filed an amended complaint on June 9, 2014. On June 2, 2014, the City of Chicago also filed a complaint in Illinois state court against the same set of defendants, including Actavis plc, that were sued in the California Action. Co-defendants in the action removed the matter to the federal court in Illinois. Both the California and Chicago complaints allege that the manufacturer defendants engaged in a deceptive campaign to promote their products in violation of state and local laws. Each of the complaints seeks unspecified monetary damages, penalties and injunctive relief. Defendants have moved to dismiss the complaints in each action. On May 8, 2015, the court in the Chicago litigation granted the Company’s motion to dismiss the complaint. On August 26, 2015, the City of Chicago filed a second amended complaint. In the California action, on August 27, 2015, the court stayed the action based on primary jurisdiction arguments raised in the motions to dismiss. On December 15, 2015, the State of Mississippi filed a lawsuit in Mississippi state court against several pharmaceutical manufacturers. The Mississippi action parallels the allegations in the California and Chicago matters and seeks monetary and equitable relief. The Company anticipates that additional suits will be filed. The Company believes it has several meritorious defenses to the claims alleged. However, an adverse determination in these actions could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Testosterone Replacement Therapy Class Action. On November 24, 2014, the Company was served with a putative class action complaint filed on behalf a class of third party payers in federal court in Illinois. The suit alleges that the Company and other named pharmaceutical defendants violated various laws including the federal Racketeer Influenced and Corrupt Organizations Act and state consumer protection laws in connection with the sale and marketing of certain testosterone replacement therapy pharmaceutical products (“TRT Products”), including the Company’s Androderm ® product. This matter was filed in the TRT Products Liability MDL, described in more detail below, notwithstanding that it is not a product liability matter. Plaintiff alleges that it reimbursed third parties for dispensing TRT Products to beneficiaries of its insurance policies. Plaintiff seeks to obtain certain equitable relief, including injunctive relief and an order requiring restitution and/or disgorgement, and to recover damages and multiple damages in an unspecified amount. Defendants filed a joint motion to dismiss the complaint, after which plaintiff amended its complaint. Defendants jointly filed a motion to dismiss the amended complaint, which was granted in part and denied in part on February 3, 2016. The Court dismissed plaintiff’s substantive RICO claims for mail and wire fraud for failure to plead with particularity under Rule 9(b) but granted plaintiffs leave to replead. The court also dismissed plaintiff’s state law statutory claims and common law claims for fraud and unjust enrichment. The Court declined to dismiss plaintiff’s conspiracy claims pursuant to 18 U.S.C. § 1962(d) and its claims for negligent misrepresentation. On March 2, 2016, the defendants jointly filed a Motion for Reconsideration of the court’s ruling on plaintiff’s claims under 18 U.S.C. § 1962(d). Plaintiff filed its Third Amended Complaint on April 7, 2016. The Company believes it has substantial meritorious defenses to the claims alleged and intends to vigorously defend the action. However, an adverse determination in the case could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows.
TNS Products Litigation. On March 19, 2014, a complaint was filed in the federal district court in California. The complaint alleges violations of the California Unfair Competition Law, the Consumers Legal Remedies Act, and the False Advertising Law, and deceit. On June 2, 2014, Plaintiff filed a first amended complaint. On June 23, 2014, Allergan filed a motion to dismiss the first amended complaint. On September 5, 2014, the court granted-in-part and denied-in-part Allergan’s motion to dismiss. On September 8, 2014, the court set trial for September 1, 2015. On November 4, 2014, Allergan and SkinMedica filed a motion to dismiss. On January 7, 2015, Allergan and SkinMedica’s motion to dismiss was denied. On January 15, 2015, the court set a trial date of February 16, 2016. On February 19, 2015 Plaintiff filed a third amended complaint. On May 27, 2015, the case was stayed pending the decision of the Ninth Circuit Court of Appeals in another matter involving similar legal issues. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
West Virginia Prescription Drug Abuse Litigation. On June 26, 2012, the State of West Virginia filed a lawsuit against multiple distributors of prescription drugs, including Anda. The complaint generally alleges that the defendants distributed prescription drugs in West Virginia in violation of state statutes, regulation and common law. The complaint seeks injunctive relief and unspecified damages and penalties. On January 3, 2014, plaintiff filed an amended complaint which the defendants moved to dismiss. On December 16, 2014, the court issued an order denying the defendants’ motion to dismiss. On January 27, 2015, the State filed a second amended complaint which the Company moved to dismiss. On September 8, 2015, the court issued a ruling denying the motion to dismiss the second amended complaint. On October 23, 2015, defendants filed a writ of prohibition in the Supreme Court of Appeals of West Virginia seeking review of the court’s denial of the motion to dismiss the second amended complaint. On January 5, 2016, the Supreme Court of Appeals of West Virginia declined to issue an order to show cause on defendants’ writ of prohibition. The case is in its preliminary stages and the Company believes it has substantial meritorious defenses to the claims alleged. However, an adverse determination in the case could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows.
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Xaleron Dispute. On February 5, 2016, Xaleron Pharmaceuticals, Inc. filed a lawsuit against Allergan, Inc. and Actavis, Inc. in state court in New York. The complaint, filed on February 26, 2016, alleges Allergan misappropriated Xaleron’s confidential business information and asserts claims for unfair competition, tortious interference with prospective economic advantage and unjust enrichment. The Company intends to vigorously defend against this action. However, this action, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Employment Litigation
In July 2012, Forest and certain of its affiliates were named as defendants in an action brought by certain former company sales representatives and specialty sales representatives in the federal district court in New York. The action is a putative class and collective action, and alleges class claims under Title VII for gender discrimination with respect to pay and promotions, as well as discrimination on the basis of pregnancy, and a collective action claim under the Equal Pay Act. The proposed Title VII gender class includes all current and former female sales representatives employed by the Company throughout the U.S. from 2008 to the date of judgment, and the proposed Title VII pregnancy sub-class includes all current and former female sales representatives who have been, are, or will become pregnant while employed by the Company throughout the U.S. from 2008 to the date of judgment. The proposed Equal Pay Act collective action class includes current, former, and future female sales representatives who were not compensated equally to similarly-situated male employees during the applicable liability period. The Second Amended Complaint also includes non-class claims on behalf of certain of the named Plaintiffs for sexual harassment and retaliation under Title VII, and for violations of the Family and Medical Leave Act. On August 14, 2014, the court issued a decision on the Company’s motion to dismiss, granting it in part and denying it in part, striking the plaintiffs’ proposed class definition and instead limiting the proposed class to a smaller set of potential class members and dismissing certain of the individual plaintiffs’ claims. Plaintiffs filed a motion for conditional certification of an Equal Pay Act collective action on May 22, 2015 which the Company has opposed. On September 2, 2015, the court granted plaintiffs motion to conditionally certify a collective action. The litigation is still in its early stages and the parties are beginning to work on discovery matters. The Company intends to continue to vigorously defend against this action. At this time, the Company does not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.
FDA Litigation
In May 2002, Company subsidiary Watson Laboratories, Inc. reached an agreement with the FDA on the terms of a consent decree with respect to its Corona, California manufacturing facility. The court approved the consent decree on May 13, 2002 ( United States of America v. Watson Laboratories, Inc., et. al ., United States District Court for the Central District of California, EDCV-02-412-VAP). The consent decree applies only to the Company’s Corona, California facility and not other manufacturing sites. The decree requires that the Corona, California facility complies with the FDA’s current Good Manufacturing Practices (“cGMP”) regulations.
Pursuant to the agreement, the Company hired an independent expert to conduct inspections of the Corona facility at least once each year. In January 2016 the independent expert concluded its most recent inspection of the Corona facility. At the conclusion of the inspection, the independent expert reported its opinion to the FDA that, based on the findings of the audit of the facility, the FDA’s applicable cGMP requirements, applicable FDA regulatory guidance, and the collective knowledge, education, qualifications and experience of the expert’s auditors and reviewers, the systems at the Corona facility audited and evaluated by the expert are in compliance with the FDA’s cGMP regulations. However, the FDA is not required to accept or agree with the independent expert’s opinion. The FDA has conducted periodic inspections of the Corona facility since the entry of the consent decree, and concluded its most recent general cGMP inspection in December 2014. At the conclusion of the inspection, the FDA inspectors issued a Form 483 to the facility identifying certain observations concerning the instances where the facility failed to follow cGMP regulations. The facility promptly responded to the Form 483 observations. If in the future, the FDA determines that, with respect to its Corona facility, the Company has failed to comply with the consent decree or FDA regulations, including cGMPs, or has failed to adequately address the FDA’s inspectional observations, the consent decree allows the FDA to order a variety of actions to remedy the deficiencies. These actions could include ceasing manufacturing and related operations at the Corona facility, and recalling affected products. Such actions, if taken by the FDA, could have a material adverse effect on the Company, its results of operations, financial position and cash flows.
Patent Litigation
Patent Enforcement Matters
Acular LS®. In September 2015, Allergan received a Paragraph IV certification notice letter from Aurobindo Pharma USA Inc. (“Aurobindo”) contending that U.S. Patent Numbers 8,008,338 (the “’338 Patent”), 8,207,215 (the “’215 Patent), 8,377,982 (the “’982 Patent”), 8,541,163 (the “’163 Patent”), 8,648,107 (the “’107 Patent”), 8,906,950 (the “’950 Patent”), and 8,946,281 (the “’281
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Patent”) are invalid and not infringed by Aurobindo’s proposed generic version of Acular LS ® . While the Company intends to vigorously defend the ’338 Patent, the ’215 Patent, the ’982 Patent, the ’163 Patent, the ’107 Patent, the ’950 Patent, and the ’281 Patent and pursue its legal rights, Allergan can offer no assurance as to whether such lawsuit will be successful and that a generic version will not be launched. In November 2015, Allergan filed a complaint against Aurobindo in the U.S. District Court for the Eastern District of Texas, Marshall Division (the “Texas Litigation”) and, in the U.S. District Court for the District of Delaware (the “Delaware Litigation”). These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than March 30, 2018 (unless there is a final court decision adverse to Allergan sooner). In January 2016, Aurobindo filed a counterclaim against Allergan in the Delaware Litigation and Texas Litigation. In March 2016, the Court in the Texas Litigation entered an order scheduling the bench trial for November 1, 2017. On April 18, 2016, Allergan entered into a settlement agreement with Aurobindo in the Delaware Litigation and Texas Litigation, joint stipulations of dismissal with prejudice were filed and the Delaware Litigation and Texas Litigation cases were terminated.
Amrix®. In August 2014, Aptalis Pharmatech, Inc. (“Aptalis”) and Ivax International GmbH (“Ivax”), Aptalis’s licensee for Amrix, brought an action for infringement of U.S. Patent No. 7,790,199 (the “‘199 patent”), and 7,829,121 (the “‘121 patent”) in the U.S. District Court for the District of Delaware against Apotex Inc. and Apotex Corp. (collectively “Apotex”). Apotex has notified Aptalis that it has filed an ANDA with the FDA seeking to obtain approval to market a generic version of Amrix before these patents expire. (The ‘199 and ‘121 patents expire in November 2023.) This lawsuit triggered an automatic stay of approval of Apotex’s ANDA until no earlier than December 27, 2016 (unless there is a final court decision adverse to Forest sooner, and subject to any other exclusivities, such as a first filer 180 day market exclusivity). A bench trial concluded on November 17, 2015. Post-trial briefing concluded on April 8, 2016. The Company believes it has meritorious claims to prevent the generic applicant from launching a generic version of Amrix. However, there can be no assurance a generic version will not be launched.
Atelvia®. In August and October 2011 and March 2012, Warner Chilcott received Paragraph IV certification notice letters from Watson Laboratories, Inc. – Florida (together with Actavis, Inc. (formerly Watson Pharmaceuticals, Inc.) and its subsidiaries, “Actavis”), Teva and Ranbaxy Laboratories Ltd. (together with its affiliates, “Ranbaxy”) indicating that each had submitted to the FDA an ANDA seeking approval to manufacture and sell a generic version of Atelvia ® 35 mg tablets (“Atelvia ® “). The notice letters contend that Warner Chilcott’s U.S. Patent Nos. 7,645,459 (the “‘459 Patent”) and 7,645,460 (the “‘460 Patent”), two formulation and method patents expiring in January 2028, are invalid, unenforceable and/or not infringed. Warner Chilcott filed a lawsuit against Actavis in October 2011, against Teva in November 2011 and against Ranbaxy in April 2012 in the U.S. District Court for the District of New Jersey charging each with infringement of the ‘459 Patent and ‘460 Patent. On August 21, 2012, the United States Patent and Trademark Office issued to the Company U.S. Patent No. 8,246,989 (the “‘989 Patent”), a formulation patent expiring in January 2026. The Company listed the ‘989 Patent in the FDA’s Orange Book, each of Actavis, Teva and Ranbaxy amended its Paragraph IV certification notice letter to contend that the ‘989 Patent is invalid and/or not infringed, and Warner Chilcott amended its complaints against Actavis, Teva and Ranbaxy to assert the ‘989 Patent. On October 2, 2013, Actavis divested its ANDA to Amneal Pharmaceuticals. In September 2013, Warner Chilcott received a Paragraph IV certification notice letter from Impax Laboratories, Inc. indicating that it had submitted to the FDA an ANDA seeking approval to manufacture and sell a generic version of Atelvia ® . Warner Chilcott filed a lawsuit against Impax on October 23, 2013, asserting infringement of the ‘459, ‘460, and ‘989 patents. On June 13, June 30, and July 15, 2014, the Company entered into settlement agreements with Ranbaxy, Amneal and Impax, respectively. Each agreement permits Ranbaxy, Amneal and Impax to launch generic versions of Atelvia ® on July 9, 2025, or earlier in certain circumstances. Trial against Teva began on July 14, 2014 and concluded on July 18, 2014. On March 4, 2015, the District Court ruled that the claims at issue in the litigation are invalid for obviousness. The Company intends to appeal this ruling. On March 5, 2015, the Company filed a motion for entry of an injunction or stay pending appeal seeking to enjoin Teva from launching a generic version of Atelvia pending such appeal. On March 30, 2015, the District Court denied the Company’s motion for entry of an injunction or stay during the pendency of an appeal, but temporarily enjoined Teva from launching its generic product for 10 business days following entry of the order so that the Company could move before the Federal Circuit for an injunction pending appeal. On April 27, 2015, the Federal Circuit temporarily enjoined Teva from launching its generic product pending resolution of the Company’s motion for an injunction pending appeal. The Federal Circuit denied the Company’s motion on May 15, 2015, and Teva launched their generic version of Atelvia®. Appellate briefing is complete and oral argument was held on February 1, 2016.
On March 18, 2016, the U.S. Court of Appeals for the Federal Circuit entered its opinion and judgment affirming the District Court’s decision. On April 25, 2016, the U.S. Court of Appeals for the Federal Circuit issued a mandate to the U.S. District Court for the District of New Jersey.
Bystolic® IPR. On December 23, 2015, Forest Laboratories Holdings Limited (“Forest”) received a notification letter that an Inter Partes Review of the USPTO (“IPR”) petition was filed by Lower Drug Prices for Consumers, LLC (“LDPC”) regarding U.S. Patent No. 6,545,040, expiring on December 17, 2021 (the “’040 Patent”). LDPC filed the IPR petition on December 22, 2015, and refiled a corrected petition on January 20, 2016. Forest filed a Patent Owner’s Preliminary Response on April 22, 2016.
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Canasa®. In July 2013, Aptalis Pharma US, Inc. and Aptalis Pharma Canada Inc. brought actions for infringement of U.S. Patent Nos. 8,217,083 (the “‘083 patent”) and 8,436,051 (the “‘051 patent”) in the U.S. District Court for the District of New Jersey against Mylan and Sandoz. These companies have notified Aptalis that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Canasa ® before these patents expire. Amended complaints were filed against these companies in November 2013 adding claims for infringement of U.S. Patent No. 7,854,384 (the “‘384 patent”). The ‘083, ‘051, and ‘384 patents expire in June 2028. On November 11, 2015, Aptalis entered into a settlement agreement with Mylan. Under the terms of the settlement agreement, Mylan may launch its generic version of Canasa® on December 15, 2018, or earlier under certain circumstances. On March 22, 2016, Aptalis entered into a settlement agreement with Sandoz. On December 14, 2015, Aptalis brought an action for infringement of the ‘083, ‘051, and ‘384 patents in the U.S. District Court for the District of New Jersey against Pharmaceutical Sourcing Partners, Inc. (“PSP”). PSP had notified Aptalis that it had filed an ANDA with the FDA seeking to obtain approval to market generic versions of Canasa® before certain of these patents expire. This lawsuit triggered an automatic stay of approval of PSP’s ANDA that expires no earlier than May 2018 (unless a court issues a decision adverse to Aptalis sooner). On December 23 and 27, 2015, Aptalis brought actions for infringement of the ‘083, ‘051, and ‘384 patents in the U.S. District Courts for the District of New Jersey and the District of Delaware, respectively, against Delcor Asset Corp., Renaissance Pharma, Inc. and Renaissance Acquisition Holdings, LLC (“Delcor”). Delcor has notified Aptalis that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Canasa before certain of these patents expire. These lawsuits triggered an automatic stay of approval of Delcor’s ANDA that expires no earlier than May 2018 (unless there is a final court decision adverse to Aptalis sooner). On March 14, 2016, Aptalis filed a motion to dismiss PSP’s Seventh and Eighth counterclaims or in the alternative, to bifurcate the trial and stay discovery relating to PSP’s seventh and eighth counterclaims. Trial is scheduled for November 2017 in the PSP action. On April 8, 2016, Aptalis entered into a settlement agreement with Delcor. The Company believes it has meritorious claims to prevent the generic applicants from launching a generic version of Canasa ®. However, there can be no assurance a generic version will not be launched.
Combigan® II. In 2012, Allergan filed a complaint against Sandoz, Alcon, Apotex and Watson in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging that their proposed products infringe U.S. Patent Number 8,133,890 (“890 Patent”), and subsequently amended their complaint to assert infringement of U.S. Patent Number 8,354,409. In March 2013, Allergan received a Paragraph IV invalidity and non-infringement certification from Sandoz, contending that the ‘890 Patent is invalid and not infringed by the proposed generic product. In October 2013, Allergan filed a motion to stay and administratively close the Combigan II matter, which was granted. In April 2015, Allergan filed a stipulation of dismissal and the U.S. District Court granted the Order with respect to the Watson defendants. In October 2015, the U.S. District Court entered an order consolidating the Combigan® III matter C.A. 2:15-cv-00347-JRG into this matter C.A. 2:12-cv-00207-JRG, as lead case and subsequently, set the bench trial for October 25, 2016. A Markman Hearing was held on March 2, 2016. While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched.
Combigan® III. On January 26, 2015, Allergan received a Paragraph IV letter from Sandoz contending that U.S. Patent Numbers 7,030,149, 7,320,976, 7,642,258, and 8,748,425 are invalid and not infringed by the proposed generic product. In March 2015, Allergan filed a complaint against Sandoz in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging that their proposed products infringe U.S. Patent Numbers 7,030,149, 7,320,976, 7,642,258, and 8,748,425 (the “Combigan Patents”). In April 2015, Sandoz filed a counterclaim against Allergan. In August 2015, Allergan filed a motion for consolidation with C.A. 2:12-cv-00207-JRG and request for earlier trial date. In October 2015, the U.S. District Court held oral argument on the motion for consolidation and earlier trial date and entered an order consolidating this matter C.A. 2:15-cv-00347-JRG into the Combigan® II matter C.A. 2:12-cv-00207-JRG and subsequently, set the bench trial for October 25, 2016. A Markman Hearing was held on March 2, 2016. While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched.
Delzicol®. On August 28, 2015, Warner Chilcott Company, LLC, Warner Chilcott (US), LLC, and Qualicaps Co., Ltd. (collectively, “Plaintiffs”) brought an action for infringement of U.S. Patent No. 6,649,180 (the “‘180 patent”) in the United States District Court for the Eastern District of Texas against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. (collectively, “Teva”). Teva notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol® before the ‘180 patent expires in April 2020. This lawsuit triggered an automatic stay of approval of Teva’s ANDA that expires no earlier than January 2018 (unless there is a final court decision adverse to Plaintiffs sooner). Trial is scheduled for October 2017. On November 9, 2015, Plaintiffs also brought an action for infringement of ‘180 patent in the United States District Court for the Eastern District of Texas against Mylan Pharmaceuticals, Inc., Mylan Laboratories Limited and Mylan, Inc. (collectively, “Mylan”). Mylan notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol® before the ‘180 patent expires in April 2020. This lawsuit triggered an automatic stay of approval of Mylan’s ANDA that expires no earlier than March 2018 (unless a court issues a decision adverse to Plaintiffs sooner). On December 16, 2015, Mylan filed a motion to dismiss for failure to state a claim, lack of personal jurisdiction, and improper venue, which remains pending. Trial is scheduled for October 2017. In March 2016, the Court entered an order consolidating the Mylan litigation (C.A. 2:15-cv-01740) with the Teva litigation (C.A. 2:15-cv-01471) matter as the lead case.
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In February 2016, Warner Chilcott received a Paragraph IV letter from Zydus notifying Warner Chilcott that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol® before the patent expires in April 2020, contending that U.S. Patent Number 6,649,180 (the “’180 patent”) is invalid and not infringed by the proposed generic product. On April 1, 2016, Warner Chilcott Company, LLC, Warner Chilcott (US), LLC, and Qualicaps Co., Ltd. (collectively, “Plaintiffs”) brought an action for infringement of U.S. Patent No. 6,649,180 (the “‘180 patent”) in the United States District Court for the Eastern District of Texas against Cadila Healthcare Ltd., Zydus International Pvt. Ltd., Zydus Pharmaceuticals (USA) Inc. (collectively, “Zydus”). While the Company intends to vigorously defend the patent at issue in these litigations, Warner Chilcott can offer no assurance as to whether the lawsuits will be successful and that a generic version will not be launched.
Gelnique® 10% gel. In October 2015, Actavis Laboratories, UT, Inc. (“Actavis”) filed a complaint in the U.S. District Court for the District of Delaware for infringement of U.S. Patent Nos. 7,029,694 (“’694 Patent”), 7,179,483 (“’483 Patent”), 8,241,662 (“’662 Patent”), and 8,920,392 (“’392 Patent”) against Par Pharmaceutical, Inc. (“Par”). Par notified Plaintiff that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Gelnique® 10% gel before the ’694 Patent, ’483 Patent, ’662 Patent, and the ’392 Patent expires. The ’694, ’483, and ’662 Patents expire in April 2020, and the ’392 Patent expires in March 2031. This lawsuit triggered an automatic stay of approval of Par’s ANDA that expires no earlier than February 19, 2018 (unless there is a final court decision adverse to Plaintiff sooner).
Lastacaft®. In October 2014, Allergan and Vistakon Pharmaceuticals, LLC (“Vistakon”) filed a complaint in the U.S. District Court for the District of Delaware for infringement of U.S. Patent No. 8,664,215 (“’215 Patent”) against Wilshire Pharmaceuticals, Inc. (“Wilshire”). In February 2015, Wilshire filed a motion to dismiss Count II of the complaint for lack of subject matter jurisdiction and a counterclaim against Allergan and Vistakon. The parties stipulated and the Court ordered that Count II is dismissed without prejudice. In June 2015, the Court scheduled a bench trial for July 17, 2017. This lawsuit triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than January 28, 2018 (unless there is a final court decision adverse to Allergan sooner). While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched.
Latisse® III. In December 2014, Allergan and Duke University filed a complaint for declaratory judgment of infringement of U.S. Patent Nos. 8,906,962 (“‘962 Patent”) against Apotex. In January 2015, Allergan and Duke subsequently filed an amended complaint against Apotex to assert infringement of U.S. Patent Number 8,926,953 (“‘953 Patent”). In March 2015, Allergan and Duke filed a second amended complaint asserting only the ‘953 Patent. Apotex filed a motion to dismiss for failure to state a claim with respect to the ‘953 Patent.
In February 2016, Allergan received a Paragraph IV letter from Sandoz notifying Allergan that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Latisse® before the patents expire in January 2023, contending that U.S. Patent Numbers 9,216,183 (the “’183 patent”) and 9,226,931 (the “’931 patent) are invalid and not infringed by the proposed generic product.
In December 2014, Allergan and Duke filed a complaint for infringement of U.S. Patent No. 8,906,962 (“‘962 Patent”) against Sandoz, Inc. (“Sandoz”), Akorn, Inc. (“Akorn”), Hi-Tech Pharmacal Co., Inc. (“Hi-Tech”), and Actavis, Inc., Watson Laboratories, Inc., and Actavis Pharma, Inc. (collectively, “Actavis”). In January 2015, Allergan and Duke subsequently filed an amended complaint against Sandoz, Akorn, Hi-Tech, and Actavis to assert infringement of U.S. Patent Number 8,926,953 (“‘953 Patent”). In March 2015, Allergan filed a notice of voluntary dismissal as to the Actavis defendants. In March 2015, Allergan and Duke filed a motion for leave to file a second amended complaint asserting only the ‘953 Patent. In April 2015, Sandoz filed a motion to dismiss for failure to state a claim. In May 2015, Akorn and Hi-Tech filed a motion to dismiss for failure to state a claim. On May 19, 2015, the court entered an opinion and order granting Allergan and Duke’s motion for leave to file a second amended complaint, which will render moot Apotex’s motion to dismiss for failure to state a claim, Allergan and Duke’s motion to dismiss Apotex’s counterclaims, Sandoz’s motion to dismiss for failure to state a claim, and Akorn and Hi-Tech’s motion to dismiss for failure to state a claim. On May 22, 2015, Allergan and Duke filed a second amended complaint. On June 22, 2015, Apotex and Sandoz filed separate motions to dismiss for failure to state a claim. On July 2, 2015, Akorn and Hi-Tech filed a motion for judgment on the pleadings. On August 31, 2015, the court issued an order and judgment dismissing the case with prejudice in favor of Apotex, Sandoz and Akorn on all of Allergan’s claims alleging infringement of the ‘953 patent. In the Sandoz and Akorn matters, the court also declared and adjudged the ‘953 patent invalid as obvious, and collaterally estopped Allergan from asserting the ‘953 patent against Sandoz or Akorn or contesting the invalidity of the ‘953 patent. In late September, the court entered a final judgment that declared and adjudged claims 8, 23 and 26 of the ‘953 patent invalid as obvious and collaterally estopped Allergan from asserting claims 8, 23 and 26 of the ‘953 patent against Apotex and Akorn or contesting the invalidity of claims 8, 23 and 26 of the ‘953 patent. On September 30, 2015, Allergan filed a Notice of Appeal to the Court of Appeals for the Federal Circuit. On October 19, 2015, the U.S. Court of Appeals for the Federal Circuit docketed the appeal filed by Allergan. In March 2016, Allergan filed its opening brief. While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched.
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Minastrin® 24 Fe. On June 6, 2014, Warner Chilcott sued Lupin Atlantis Holdings SA, Lupin Ltd. and Lupin Pharmaceuticals, Inc. (collectively, “Lupin”) in the United States District Court for the District of Maryland, alleging that sales of Lupin’s norethindrone and ethinyl estradiol chewable tablets, a generic version of Warner Chilcott’s Minastrin ® 24 Fe, would infringe U.S. Patent 6,667,050 (the “‘050 patent”). The Complaint seeks an injunction. Pursuant to the provisions of the Hatch-Waxman Act, the FDA is precluded from granting final approval to the generic applicants until the earlier of thirty months after the generic applicant provided Warner Chilcott with notice of its abbreviated new drug application filing or the generic applicant prevails in the pending litigation. Warner Chilcott further notes that FDA will not approve any ANDA product before May 8, 2016 due to Minastrin ® 24 Fe’s new dosage form exclusivity, which expires on that date. The litigation against Lupin is pending. Warner Chilcott notes that on April 29, 2014, several of the claims of the ‘050 patent were declared invalid in the Generess litigation discussed above. Warner Chilcott has appealed the Generess decision and the appeal is currently pending. Lupin and the Company have entered into a settlement agreement and have moved the District Court in the Generess matter for an indicative ruling that it would vacate the decision in Generess if the pending appeal in that case is remanded. On April 8, 2015, the District Court granted the parties’ motion and the Generess appeal has been terminated. The parties request that the District Court in Generess vacate its prior opinion was granted on May 18, 2015. This case was dismissed on May 18, 2015. By letter dated April 15, 2015, the Company received a Paragraph IV notice letter from Amneal Pharmaceuticals LLC (“Amneal”). A complaint against Amneal was filed on May 28, 2015 in the United States District Court for the District of New Jersey. The Company settled its litigation with Amneal and the case was dismissed on January 2016. The Company is also involved in ANDA litigation with Mylan Pharmaceuticals, Inc. ,(“Mylan”) and Jai Pharma Limited, (“Jai”) regarding their Paragraph IV challenge to the ‘050 patent. The Company settled its litigation with Mylan and Jai and the case was dismissed on April 27, 2016.
Namenda XR®. Between January and October 2014, Forest Laboratories, Inc., Forest Laboratories Holdings, Ltd. (collectively, “Forest”) and Merz Pharma and Adamas Pharmaceuticals, Forest’s licensors for Namenda XR® (all collectively, “Plaintiffs”), brought actions for infringement of some or all of U.S. Patent Nos.
5,061,703 (the “‘703 patent”), 8,039,009 (the “’009 patent”), 8,168,209 (the “‘209 patent”), 8,173,708 (the “‘708 patent”), 8,283,379 (the “‘379 patent”), 8,329,752 (the “‘752 patent”), 8,362,085 (the “‘085 patent”), and 8,598,233 (the “‘233 patent”) in the U.S. District Court for the District of Delaware against Wockhardt, Teva, Sun, Apotex, Anchen, Zydus, Watson, Par, Mylan, Amneal, Ranbaxy, and Amerigen, and related subsidiaries and affiliates thereof. These companies have notified Plaintiffs that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namenda XR® before these certain patents expire. Including a 6-month pediatric extension of regulatory exclusivity, the ‘703 patent expires in October 2015, the ‘009 patent expires in September 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents expire in May 2026. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than June 2016 (unless there is a final court decision adverse to Plaintiffs sooner). On June 11, 2014, Mylan filed a motion to dismiss for lack of personal jurisdiction, which the district court denied on March 30, 2015. On December 18, 2014, Ranbaxy filed an IPR before the Patent Trial and Appeal Board, U.S. Patent and Trademark Office, with respect to the ‘085 patent. Adamas filed a preliminary response on April 14, 2015. On May 1, 2015, Forest entered into a settlement agreement with Ranbaxy. On May 15, 2015, the Patent Trial and Appeal Board granted Adamas and Ranbaxy’s joint motion to terminate the case. On October 17, 2014, Forest and Actavis Laboratories FL, Inc. (f/k/a Watson Laboratories, Inc. — Florida) filed a stipulation dismissing their respective claims without prejudice. On November 3, 2014, Plaintiffs entered into a settlement agreement with Wockhardt. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Wockhardt that will permit it to launch its generic version of Namenda XR® as of the date that is the later of (a) two (2) calendar months prior to the expiration date of the last to expire of the ‘703 patent, the ‘209 patent, the ‘708 patent, the ‘379 patent, the ‘752 patent, the ‘085 patent, and the ‘233 patent, including any extensions and/or pediatric exclusivities; or (b) the date that Wockhardt obtains final FDA approval of its ANDA, or earlier in certain circumstances. On January 13, 2015, Plaintiffs entered into settlement agreements with Anchen and Par. Under the terms of the settlement agreements, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide licenses to Anchen and Par that will permit them to launch their generic versions of Namenda XR® as of the date that is the later of (a) two (2) calendar months prior to the expiration date of the last to expire of the ‘209 patent, the ‘708 patent, the ‘379 patent, the ‘752 patent, the ‘085 patent, and the ‘233 patent, as well as the ‘009 patent for Par only, including any extensions and/or pediatric exclusivities; or (b) the dates that Anchen and Par obtain final FDA approval of their respective ANDAs, or earlier in certain circumstances. On May 11, 2015, Forest entered into a settlement agreement with Sun. On August 18, 2015, Forest entered into a settlement agreement with Zydus. On September 9, 2015, Forest entered into a settlement agreement with Amneal. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Amneal that will permit it to launch its generic version of Namenda XR® beginning January 31, 2020, following receipt by Amneal of final approval from the FDA on its ANDA for generic Namenda XR®; or (b) under certain circumstances, Amneal has an option to launch an authorized generic version of Namenda XR® beginning on January 31, 2021. The Company entered into a settlement agreement with Amerigen on October 20, 2015. The Company entered into a settlement agreement with Mylan on November 16, 2015. The Company entered into a settlement agreement with Lupin on December 22, 2015. On January 5, 2016, the district court issued a claim construction ruling that included findings of indefiniteness as to certain claim terms in the asserted patents. On February 11, 2016, the Company settled with Apotex. Trial began on February 16, 2016 with the remaining
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defendant Teva with respect to the ‘009 patent. Post-trial briefing concluded on April 29, 2016. The Parties have reached agreement on settlement with Teva subject to Court approval. On October 9, 2015, the Company also brought an action for infringement of the ‘009, ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents in the U.S. District Court for the District of Delaware against Accord Healthcare, Inc. and Intas Pharmaceuticals Limited (collectively, “Accord”). The Accord defendants have notified Plaintiffs that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namenda XR® before these patents expire. On January 14, 2016, Forest entered into a settlement agreement with Accord. On December 18, 2015, the Company also brought an action for infringement of the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents in the U.S. District Court for the District of Delaware against Panacea Biotec, Ltd. (“Panacea”). Panacea has notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namenda XR® before these patents expire. This lawsuit triggered an automatic stay of approval of Panacea’s ANDA that expires no earlier than May 2018 (unless a court issues a decision adverse to Plaintiffs sooner). The Company believes it has meritorious claims to prevent the generic applicants from launching a generic version of Namenda XR®. However, there can be no assurance a generic version will not be launched.
Namzaric™. On August 27, 2015, Forest Laboratories, LLC, Forest Laboratories Holdings, Ltd. (collectively, “Forest”) and Adamas Pharmaceuticals, Inc. (all collectively, “Plaintiffs”), brought an action for infringement of some or all of U.S. Patent Nos. 8,039,009 (the “’009 patent”), 8,058,291 (the “‘291 patent”), 8,168,209 (the “‘209 patent”), 8,173,708 (the “‘708 patent”), 8,283,379 (the “‘379 patent”), 8,293,794 (the “‘794 patent”), 8,329,752 (the “‘752 patent”), 8,338,485 (the “‘485 patent”), 8,338,486 (the “‘486 patent”), 8,362,085 (the “‘085 patent”), 8,580,858 (the “‘858 patent”) and 8,598,233 (the “‘233 patent”) in the U.S. District Court for the District of Delaware against Amneal Pharmaceuticals LLC and Par Pharmaceutical, Inc., and related subsidiaries and affiliates thereof. These companies have notified Plaintiffs that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namzaric™ before these certain patents expire. Including a 6-month pediatric extension of regulatory exclusivity, the ‘009 patent expires in September 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents expire in May 2026. The ‘291 patent expires in December 2029, and the ‘794, ‘485, ‘486, and ‘858 patents expire in November 2025. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than January 2018 (unless there is a final court decision adverse to Plaintiffs sooner). On October 23, 2015, the Company also brought an action for infringement of the ‘009, ‘291, ‘209, ‘708, ‘379, ‘794, ‘752, ‘485, ‘486, ‘085, ‘858 and ‘233 patents in the U.S. District Court for the District of Delaware against Amerigen Pharmaceuticals, Inc. and Amerigen Pharmaceuticals Ltd. (collectively, “Amerigen”). The Amerigen defendants have notified Plaintiffs that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namzaric™ before these certain patents expire. On January 5, 2016, the district court in the Namenda XR® patent litigations issued a claim construction ruling that included findings of indefiniteness as to certain claim terms in certain of the patents also asserted in the pending Namzaric™ patent litigations. The Company entered into a settlement agreement with Par on April 29, 2016. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Par that will permit it to launch its generic version of Namzaric® as of June 5, 2029, or earlier in certain circumstances. Trial is scheduled for October 2017. While the Company intends to vigorously defend the patents at issue in this litigation, Forest can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched.
Rapaflo®. On June 17, 2013, Actavis, Inc., Watson Laboratories, Inc., (collectively, “Actavis”) and Kissei Pharmaceutical Co., Ltd. (“Kissei”) sued Hetero USA Inc., Hetero Labs Limited, and Hetero Labs Limited, Unit 3 (collectively, “Hetero”) in the United States District Court for the District of Delaware, alleging that sales of silodosin tablets, a generic version of Actavis’ Rapaflo ® tablets, would infringe U.S. Patent No. 5,387,603 (the “‘603 patent”). On June 17, 2013 Actavis and Kissei sued Sandoz Inc. (“Sandoz”) in the United States District Court for the District of Delaware, alleging that sales of Sandoz’s generic version of Rapaflo ® would infringe the ‘603 patent. The complaint seeks injunctive relief. On December 22, 2014 the Parties completed a settlement agreement with Hetero. Actavis and Kissei’s lawsuit against Sandoz have been consolidated and remain pending. Pursuant to the provisions of the Hatch-Waxman Act, the FDA is precluded from granting final approval to the generic applicants prior to April 8, 2016. The Company believes it has meritorious claims to prevent the generic applicants from launching a generic version of Rapaflo®. However, if a generic applicant prevails in the pending litigation or launches a generic version of Rapaflo® before the pending litigation is finally resolved, it could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Restasis®. Between August and September 2015, Allergan brought actions for infringement of U.S. Patent Nos. 8,629,111 (the “‘111 patent”), 8,633,162 (the “‘162 patent”), 8,642,556 (the “‘556 patent”), 8,648,048 (the “‘048 patent”), and 8,685,930 (the “‘930 patent”) in the U.S. District Court for the Eastern District of Texas against Akorn, Inc, Apotex, Inc., Mylan Pharmaceuticals, Inc., Teva Pharmaceuticals USA, Inc., InnoPharma, Inc., and Pfizer, Inc., and related subsidiaries and affiliates thereof. On September 14, 2015, Allergan brought an action for infringement of these patents in the U.S. District Court for the District of Delaware against InnoPharma, Inc. and Pfizer, Inc. These companies have notified Allergan that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Restasis® before these patents expire in August 2024. In the Texas actions the District Court granted joint motions to dismiss without prejudice Teva Pharmaceutical Industries Ltd. and Pfizer, Inc., on October 12 and October 22, 2015, respectively. Teva Pharmaceuticals USA, Inc. (“Teva”) and InnoPharma, Inc. (“InnoPharma”) remain defendants in the respective actions. In October 2015, Mylan Pharmaceuticals, Inc. and Mylan, Inc. (“Mylan”) filed a motion to dismiss for lack of
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personal jurisdiction and improper venue, and for failure to state a claim as to Mylan, Inc.; Teva filed a motion to dismiss for lack of personal jurisdiction and improper venue; Apotex, Inc. and Apotex Corp. (“Apotex”) filed an answer, affirmative defenses and counterclaim; Akorn, Inc. (“Akorn”) filed an answer and counterclaim; and Teva filed an answer, counterclaim and motion to dismiss. Allergan entered into a settlement agreement with Apotex on December 15, 2015. In December 2015, Allergan and Apotex filed a joint stipulation of dismissal and the U.S. District Court granted the Order with respect to the Apotex defendants. In January 2016, the Court scheduled a bench trial for August 29, 2017. While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched.
In February 2016, Allergan filed an amended complaint to include U.S. Patent Number 9,248,191 (the “’191 patent”). In February and March 2016, Allergan received Paragraph IV letters from Apotex, Mylan and Teva notifying Allergan that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Restasis® before the patents expire in August 2024, contending that the ‘191 patent is invalid and not infringed by their respective proposed generic products.
On March 1, 2016, Allergan received a Paragraph IV letter from Famy Care Limited (“Famy Care”) notifying Allergan that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Restasis® before the patents expire in August 2024, contending that the ‘111 patent, the ʼ162 patent, the ‘556 patent, the ‘048 patent, the ‘930 patent, and the ‘191 patent are invalid and not infringed by their respective proposed generic products. In March 2016, the Court entered an order requesting supplemental briefs on the effect of the Federal Circuit’s Acorda decision (No. 2014-1456) on Teva’s and Mylan’s pending motions to dismiss. In their supplemental briefs, Teva acknowledged that, under the Acorda decision, it is subject to specific personal jurisdiction in the Eastern District of Texas and that venue is proper, and Mylan requested that the District Court refrain from taking action on its pending motion until after Mylan has sought panel and en banc rehearing in the Acorda action. In April 2016, the Court issued a memorandum and opinion denying Mylan’s and Teva’s motions to dismiss. On April 12, 2016, Allergan filed a complaint for infringement of the ʼ111 patent, ʼ162 patent, ʼ556 patent, ʼ048 patent, ʼ930 patent, and the ʼ191 patent in the U.S. District Court for the Eastern District of Texas against Famy Care.
Saphris®. Between September 2014 and May 2015, Forest Laboratories, LLC, and Forest Laboratories Holdings, Ltd. (collectively, “Forest”) brought actions for infringement of some or all of U.S. Patent Nos. 5,763,476 (the “‘476 patent”), 7,741,358 (the “‘358 patent”) and 8,022,228 (the “‘228 patent”) in the U.S. District Court for the District of Delaware against Sigmapharm Laboratories, LLC, Hikma Pharmaceuticals, LLC, Breckenridge Pharmaceutical, Inc., Alembic Pharmaceuticals, Ltd. and Amneal Pharmaceuticals, LLC, and related subsidiaries and affiliates thereof. Including a 6-month pediatric extension of regulatory exclusivity, the ‘476 patent expires in December 2020, and the ‘358 and ‘228 patents expire in October 2026. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than February 13, 2017 (unless a court issues a decision adverse to Forest sooner). On February 3, 2015, the District Court consolidated the then-pending actions for all purposes. On September 30, 2015, the District Court consolidated all pending actions. On March 28, 2016, the Court entered Forest and Hikma’s proposed joint stipulation and order of adverse judgment and dismissal of claims related to the ‘358 and ‘228 patents. In April 2016, the Court granted the proposed consent judgment of non-infringement and order of dismissal of counterclaims related to the ‘358 and ‘228 patents, as well as a stipulation and order with respect to infringement of Claims 1, 2, and 6 of the ʼ476 patent, between Plaintiffs and Breckenridge. The Court also granted the proposed stipulation of entry and proposed order of adverse judgment and dismissal of counterclaims related to the ʼ358 and ʼ228 patents between Plaintiffs and Sigmapharm. Trial is scheduled to begin in August 2016 with respect to the ‘476 patent, the only remaining patent-in-suit. The Company believes it has meritorious claims to prevent the generic applicants from launching a generic version of Saphris®. However, there can be no assurance a generic version will not be launched.
Savella®. Between September 2013 and February 2014, Forest Laboratories, Inc., Forest Laboratories Holdings, Ltd. (collectively, “Forest”) and Royalty Pharma Collection Trust (“Royalty”), Forest’s licensor for Savella®, brought actions for infringement of U.S. Patent Nos. 6,602,911 (the “‘911 patent”), 7,888,342 (the “‘342 patent”), and 7,994,220 (the “‘220 patent”) in the U.S. District Court for the District of Delaware against Amneal, Apotex, First Time US Generics, Glenmark, Hetero, Lupin, Mylan, Par, Ranbaxy, and Sandoz, and related subsidiaries and affiliates thereof. These companies have notified Forest and Royalty that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Savella before these patents expire. (The ‘342 patent expires in November 2021, the ‘911 patent expires in January 2023, and the ‘220 patent expires in September 2029.) These lawsuits triggered an automatic stay of approval of the applicable ANDAs until July 14, 2016 (unless a court issues a decision adverse to Forest and Royalty Pharma sooner). On March 7, 2014, Forest and Royalty voluntarily dismissed, without prejudice, all claims against Sandoz. On March 20, 2014, the district court consolidated all of the remaining pending actions for all purposes and issued a scheduling order setting a trial date in January 2016. On May 12, 2014, Forest and Royalty entered into a settlement agreement with First Time US Generics. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Forest will provide a license to First Time that will permit it to launch its generic version of Savella® as of the date that is the later of (a) six (6) calendar months prior to the expiration date of the last to expire of the ‘911 patent, the ‘342 patent, and the ‘220 patent, including any extensions and/or pediatric exclusivities; or (b) the date that First Time obtains
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final FDA approval of its ANDA, or earlier in certain circumstances. On December 15, 2014, Forest and Royalty entered into a settlement agreement with Ranbaxy. On April 8, 2015, Defendants filed a motion to dismiss for lack of standing. On or about April 29, 2015, Forest entered into a settlement agreement with Par that will permit Par to launch its generic version of Savella® as of the date that is the later of (a) six (6) calendar months prior to the expiration date of the last to expire of the ‘911 patent, the ‘342 patent, and the ‘220 patent, including any extensions and/or pediatric exclusivities; or (b) the date that Par obtains final FDA approval of its ANDA, or earlier in certain circumstances. On December 11, 2015, Forest and Royalty entered into settlement agreements with Hetero and Glenmark. On January 8, 2016, Forest and Royalty entered into a settlement agreement with Amneal. On January 19, 2016, Forest and Royalty entered into a settlement agreement with Apotex. The defendants under these agreements may enter the market as of March 19, 2026. A bench trial concluded on January 26, 2016. Post-trial briefing concluded on April 26, 2016. The Company believes it has meritorious claims to prevent the remaining generic applicants from launching a generic version of Savella®. However, there can be no assurance a generic version will not be launched.
Teflaro®. In January 2015, Forest Laboratories, LLC, Forest Laboratories Holdings, Ltd., and Cerexa, Inc. (collectively, “Forest”) and Takeda Pharmaceutical Company Limited (“Takeda”), Forest’s licensor for Teflaro®, brought an action for infringement of some or all of U.S. Patent Nos. 6,417,175 (the “‘175 patent”), 6,906,055 (the “‘055 patent”), 7,419,973 (the “‘973 patent”) and 8,247,400 (the “‘400 patent”) in the U.S. District Court for the District of Delaware against Apotex and Sandoz, and related subsidiaries and affiliates thereof. These companies have notified Forest and Takeda that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Teflaro® before some or all of the ‘175, ‘055, ‘973 and ‘400 patents expire. (The ‘175 patent expires in April 2022, the ‘055 and ‘973 patents expire in December 2021, and the ‘400 patent expires in February 2031.) These lawsuits triggered an automatic stay of approval of the applicable ANDAs until April 29, 2018 (unless a court issues a decision adverse to Forest and Takeda sooner). On June 24, 2015, the District Court issued a scheduling order setting a trial date in June 2017. In April 2016, Forest filed a complaint for infringement of the ʼ175 patent in the U.S. District Court for the District of Delaware against Apotex. Apotex had notified Forest and Takeda that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Teflaro® before the ʼ175 patent expires in April 2022. This lawsuit triggered an automatic stay of approval of the applicable ANDA with respect to the ’175 patent until September 8, 2018 (unless a court issues a decision adverse to Forest and Takeda sooner). While the company intends to vigorously defend the patents at issue in this litigation, Forest can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched.
Viibryd®. In March 2015, Forest Laboratories, LLC, Forest Laboratories Holdings, Ltd., (collectively, “Forest”) and Merck KGaA and Merck Patent Gesellschaft Mit Beschränkter Haftung (collectively, “Merck”), Forest’s licensor for Viibryd, brought actions for infringement of U.S. Patent Nos. 7,834,020 (the “‘020 patent”), 8,193,195 (the “‘195 patent”), 8,236,804 (the “‘804 patent”) and 8,673,921 (the “‘921 patent”) in the U.S. District Court for the District of Delaware against Accord Healthcare Inc. (“Accord”), Alembic Pharmaceuticals, Ltd. (“Alembic”), Apotex, Inc. (“Apotex”), InvaGen Pharmaceuticals, Inc. (“InvaGen”), and Teva Pharmaceuticals USA, Inc. (“Teva”), and related subsidiaries and affiliates thereof. These companies have notified Forest and/or Merck that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Viibryd before the ‘020, ‘195, ‘804 and ‘921 patents expire in June 2022. These lawsuits triggered an automatic stay of approval of the applicable ANDAs until July 21, 2018 (unless a court issues a decision adverse to Forest and Merck sooner). On August 24, 2015, the District Court consolidated the actions for all purposes and issued a scheduling order setting a trial date in January 2018. On November 23, 2015, Forest and Merck brought an action for infringement of the ‘020, ‘195, ‘804 and ‘921 patents in the U.S. District Court for the District of Delaware against InvaGen, which matter was consolidated with the earlier-filed action against InvaGen. While the Company intends to vigorously defend the patents at issue in this litigation, Forest can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched.
Patent Defense Matters
Bayer Patent Litigation. In August 2012, Bayer Pharma AG (together with its affiliates, “Bayer”) filed a complaint against Warner Chilcott in the U.S. District Court for the District of Delaware alleging that Warner Chilcott’s manufacture, use, offer for sale, and/or sale of its Lo Loestrin ® Fe oral contraceptive product infringes Bayer’s U.S. Patent No. 5,980,940. In the complaint, Bayer seeks injunctive relief and unspecified monetary damages for the alleged infringement. In December 2012, Bayer amended the complaint to add a patent interference claim seeking to invalidate the Company’s ‘984 Patent, which covers the Lo Loestrin ® Fe product. On December 15, 2014, Warner Chilcott filed a Summary Judgment motion seeking dismissal of the case. On April 21, 2015, the District Court granted Warner Chilcott’s motion and held the ‘940 patent invalid for indefiniteness. On June 5, 2015, Bayer filed a notice of appeal. Briefing is complete. The U.S. Court of Appeals for the Federal Circuit heard oral argument on April 5, 2016. On April 12, 2016, the U.S. Court of Appeals for the Federal Circuit issued an opinion and judgment affirming the District Court’s decision, in favor of Warner Chilcott.
Oxymorphone Extended-Release Tablets (Generic version of Opana® ER). On December 11, 2012, Endo Pharmaceuticals Inc. (“Endo”) sued Actavis, Inc. and Actavis South Atlantic LLC (“Actavis South Atlantic”) in the United States District Court for the Southern District of New York, alleging that sales of the Company’s 7.5 mg and 15 mg oxymorphone extended-release tablets,
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generic versions of Endo’s Opana ® ER, infringe U.S. Patent Nos. 7,851,482; 8,309,122; and 8,329,216. Thereafter, FDA approved Actavis’ 5 mg, 10 mg, 20 mg, 30 mg, and 40 mg oxymorphone extended-release tablets and Endo filed a motion for a preliminary injunction seeking to prevent Actavis from selling the new strengths. On September 12, 2013, the district court denied Endo’s motion for a preliminary injunction and Actavis immediately launched the new strengths. On March 31, 2014, the Federal Circuit reversed the district court’s denial of Endo’s motion for a preliminary injunction and remanded the matter to the district court for further consideration. On January 13, 2015, Endo dismissed its claims against Actavis concerning the ‘482 patent. Trial with respect to the ‘122 and ‘216 patents began on March 23, 2015 and concluded on April 24, 2015.On August 14, 2015, the court found the ‘122 and ‘216 patents valid and infringed and ordered Actavis to cease selling its generic product within 60 days. Actavis filed a motion to amend the judgment to remove the injunction on continuing sales or in the alternative stay the injunction pending appeal. On October 8, 2015, the court tolled the 60 day period for Actavis to cease selling its generic product while the court considers the motion to amend the judgment. On April 29, 2016, the district court denied Actavis’ motion to amend the judgment to remove the injunction on continuing sales or in the alternative for a stay pending appeal, and Actavis discontinued selling its generic products. On May 3, 2016, Actavis filed in the Federal Circuit an emergency motion to stay the injunction pending appeal. That motion is currently pending. On November 7, 2014, Endo and Mallinckrodt LLC sued Actavis and certain of its affiliates in the United States District Court for the District of Delaware, alleging that sales of the Company’s generic versions of Opana ® ER, 5mg, 7.5 mg, 10 mg, 15 mg, 20 mg, 30 mg and 40 mg, infringe U.S. Patent Nos. 7,808,737 (which the USPTO recently issued to Endo) and 8,871,779 (which Endo licensed from Mallinckrodt). The case is currently pending, and trial is scheduled to begin on February 21, 2017. On September 23, 2015, the Magistrate Judge recommended granting Actavis’ motion to dismiss the ‘737 patent for invalidity/unpatentable subject matter. On November 17, 2015 the District Court Judge upheld the Magistrate’s recommendation regarding invalidity of the ‘737 patent and dismissed that patent from the case. The Company believes it has substantial meritorious defenses to the case. However, Actavis has sold its generic versions of Opana ® ER during the pendency of the above actions. Therefore, an adverse final determination that one of the patents in suit is valid and infringed could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Teva Namenda XR Patent Litigation. In December 2013, Forest Laboratories, Inc. (“Forest”) was named as a defendant in an action brought by Teva Pharmaceuticals USA, Inc. and Mayne Pharma International Pty Ltd. in the U.S. District Court for the District of Delaware. The complaint alleges that Forest infringes U.S. Patent No. 6,194,000 by making, using, selling, offering to sell, and importing Namenda XR. The district court has scheduled a trial to begin in July 2016. On October 29, 2015, Plaintiffs filed a First Amended Complaint, adding Forest Pharmaceuticals, Inc. as a named defendant. Defendants responded on November 18, 2015. On December 7, 2015, Plaintiffs filed a motion to dismiss Defendants’ counterclaims for invalidity and motion to strike certain of Defendants’ affirmative defenses concerning invalidity. Plaintiffs’ motion remains pending. The relief requested in the Amended Complaint includes damages, but not preliminary or permanent injunctive relief. On March 16, 2016, the Court entered an order denying the Company’s request to file a motion for summary judgment. The Company intends to continue to vigorously defend against this action. At this time, the Company does not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.
Product Liability Litigation
Actonel® Litigation. Warner Chilcott is a defendant in approximately 193 cases and a potential defendant with respect to approximately 392 unfiled claims involving a total of approximately 593 plaintiffs and potential plaintiffs relating to Warner Chilcott’s bisphosphonate prescription drug Actonel ® . The claimants allege, among other things, that Actonel ® caused them to suffer osteonecrosis of the jaw (“ONJ”), a rare but serious condition that involves severe loss or destruction of the jawbone, and/or atypical fractures of the femur (“AFF”). All of the cases have been filed in either federal or state courts in the United States. Warner Chilcott is in the initial stages of discovery in these litigations. In addition, Warner Chilcott is aware of four purported product liability class actions that were brought against Warner Chilcott in provincial courts in Canada alleging, among other things, that Actonel ® caused the plaintiffs and the proposed class members who ingested Actonel ® to suffer atypical fractures or other side effects. It is expected that these plaintiffs will seek class certification. Plaintiffs have typically asked for unspecified monetary and injunctive relief, as well as attorneys’ fees. Warner Chilcott is indemnified by Sanofi for certain Actonel claims pursuant to a collaboration agreement relating to the two parties’ co-promotion of the product in the United States and other countries. In addition, Warner Chilcott is also partially indemnified by the Procter & Gamble Company (“P&G”) for ONJ claims that were pending at the time Warner Chilcott acquired P&G’s global pharmaceutical business in October 2009. In May and September 2013, Warner Chilcott entered into two settlement agreements that resolved a majority of the then-existing ONJ-related claims which are subject to the acceptance by the individual respective claimants.
The Company believes it has substantial meritorious defenses to these cases and intends to defend these claims vigorously. Warner Chilcott maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if insurance does not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
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Alendronate Litigation. Beginning in 2010, approximately 129 product liability suits on behalf of approximately 170 plaintiffs have been filed against the Company and certain of its affiliates, including Cobalt Laboratories, as well as other manufacturers and distributors of alendronate for personal injuries including AFF and ONJ allegedly arising out of the use of alendronate. The actions are pending in various state and federal courts. Several of the cases were consolidated in an MDL proceeding in federal court in New Jersey. In 2012, the MDL court granted the Company’s motion to dismiss all of the cases then pending against the Company in the New Jersey MDL. The Third Circuit affirmed the dismissal. Any new cases against the Company filed in the MDL are subject to dismissal unless plaintiffs can establish that their claims should be exempted from the 2012 dismissal order. Other cases were consolidated in an MDL in federal court in New York, where the Company filed a similar motion to dismiss. The Court granted, in part, the motion to dismiss which has resulted in the dismissal of several other cases. The Company has also been served with six cases that are part of a consolidated litigation in the California state court. In 2012, the California court partially granted a motion filed on behalf of all generic defendants seeking dismissal. Appeals in the California cases have been exhausted and the Company has not yet been able to determine how that will affect the cases filed against it. The remaining active cases are part of a mass tort coordinated proceeding in New Jersey state court. In the New Jersey proceeding, the Court granted, in part, a motion to dismiss. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if our indemnification arrangements or insurance do not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Benicar® Litigation. The Company is named in approximately 1,410 actions involving allegations that Benicar®, a treatment for hypertension that Forest co-promoted with Daiichi Sankyo between 2002 and 2008, caused certain gastrointestinal injuries. Under Forest’s Co-Promotion Agreement, Daiichi Sankyo is defending us in these lawsuits.
Celexa®/Lexapro® Litigation. Approximately 185 actions are pending against Forest and its affiliates involving allegations that Celexa® or Lexapro ® caused various birth defects. Several of the cases involve multiple minor-plaintiffs. The majority of these actions have been consolidated in state court in Missouri where one case is set for trial in September 2016. Five actions remain in New Jersey state court, none of which are set for trial. There are birth defect cases pending in other jurisdictions, including a case pending in the United States District Court for the Southern District of Mississippi that is set for trial in August 2017.
The Company believes it has substantial meritorious defenses to the Celexa®/Lexapro® cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if insurance does not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Metoclopramide Litigation. Beginning in 2009, a number of product liability suits were filed against certain Company affiliates, including legacy Actavis and Watson companies, as well as other manufacturers and distributors of metoclopramide, for personal injuries allegedly arising out of the use of metoclopramide. Approximately 1,500 cases remain pending against Actavis, Watson and/or its affiliates in state and federal courts, representing claims by multiple plaintiffs. Discovery in these cases has not progressed beyond the preliminary stages as the Company has taken steps to dismiss the suits based on preemption including through initiating or defending appeals on such motions.
The Company believes that, with respect to the majority of the cases against the legacy Watson companies, it will be defended in and indemnified by Pliva, Inc., an affiliate of Teva, from whom the Company purchased its metoclopramide product line in late 2008. With respect to the cases pending against the legacy Actavis companies, the Company recently reached an agreement in principle to resolve the majority of the matters. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if our indemnification arrangements or insurance do not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Propoxyphene Litigation. Beginning in 2011, a number of product liability suits were filed against Watson and certain of its affiliates, as well as other manufacturers and distributors of propoxyphene, for personal injuries including adverse cardiovascular events or deaths allegedly arising out of the use of propoxyphene. Cases are pending against Watson and/or its affiliates in various state and federal courts, representing claims by approximately 1,400 plaintiffs. A number of the cases were consolidated in an MDL in federal district court in Kentucky. On June 22, 2012, the MDL court granted the generic defendants’ joint motion to dismiss the remaining MDL cases. On June 27, 2014, the Sixth Circuit affirmed the district court’s dismissal. Plaintiffs did not file a petition for a writ of certiorari with the United States Supreme Court. In addition, approximately 35 cases were filed in California state court. These cases were removed to federal district courts and, after disputes over whether the cases should be remanded to state court, the Ninth
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Circuit Court of Appeals determined that the removals to federal court were proper. Many of the cases in California federal courts were transferred to the U.S. District Court for the Eastern District of Kentucky and consolidated for all pretrial proceedings in front of Judge Reeves, who presided over the MDL proceedings. The Court has issued a Show Cause Order requiring plaintiffs to show cause on or before April 18, 2016 why their claims against the Generic Defendants (including Watson) should not be dismissed pursuant to the Court’s prior order in the MDL dismissing all of the claims against the Generic Defendants with prejudice. The vast majority of these cases have been dismissed against the Generic Defendants, some voluntarily dismissed with prejudice and some dismissed on procedural grounds without prejudice. Three of the seven cases that remained in California district court have now been transferred to the Eastern District of Kentucky, and the others are likely to follow and to become subject to the Court’s Show Cause Order. Once the remaining procedural matters are resolved, the defendants will file demurrers and motions to dismiss the remaining suits pursuant to the Court’s Show Cause Order.. In addition, approximately eight lawsuits have been filed in Oklahoma which plaintiffs are seeking to have remanded from federal to state court. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if insurance does not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Testosterone Litigation. Beginning in 2014, a number of product liability suits were filed against the Company and certain of its affiliates, as well as other manufacturers and distributors of testosterone products, for personal injuries including but not limited to cardiovascular events allegedly arising out of the use of Androderm ® testosterone cypionate, AndroGel and/or testosterone enanthate. Actavis, Inc. and/or one or more of its subsidiaries have been served in approximately 454 currently pending actions, three of which are pending in state courts and the remainder of which are pending in federal court. The federal court actions have been consolidated in an MDL in federal court in Illinois. The defendants have responded to the plaintiffs’ master complaint in the MDL. Plaintiffs have agreed to dismiss all claims relating to any of Actavis’ generic TRT products from the cases. These cases are in the initial stages and discovery is in the early stages. The Company anticipates that additional suits will be filed. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if insurance does not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Government Investigations, Government Litigation and Qui Tam Litigation
Warner Chilcott. Beginning in February 2012, Warner Chilcott, along with several of its current and former employees in its sales organization and certain third parties, received subpoenas from the United States Attorney for the District of Massachusetts. The subpoena received by Warner Chilcott seeks information and documentation relating to a wide range of matters, including sales and marketing activities, payments to people who are in a position to recommend drugs, medical education, consultancies, prior authorization processes, clinical trials, off-label use and employee training (including with respect to laws and regulations concerning off-label information and physician remuneration), in each case relating to all of Warner Chilcott’s current key products. The Company has recorded a contingent liability for the quarter ended March 31, 2015 under ASC 450, Contingencies, based on its analysis of this matter, however, there can be no assurance that the Company’s estimate will not differ materially from the recorded contingent liability. The Company is also aware of three qui tam complaints filed by former Warner Chilcott sales representatives and unsealed in February and March 2013 and March 2014. Two unsealed federal qui tam complaints were filed in the federal court in Massachusetts and allege that Warner Chilcott violated Federal and state false claims acts through the promotion of all of Warner Chilcott’s current key products by, among other things, making improper claims concerning the products, providing kickbacks to physicians and engaging in improper conduct concerning prior authorizations. Since then, one of the two complaints was voluntarily dismissed. The remaining complaint seeks, among other things, treble damages, civil penalties of up to eleven thousand dollars for each alleged false claim and attorneys’ fees and costs. Other similar complaints may exist under seal. The United States of America elected not to intervene in the unsealed actions. On October 29, 2015, Warner Chilcott subsidiary, Warner Chilcott Sales (US) LLC, reached an agreement with the federal government, the 50 states and the District of Columbia that resolves both the government’s investigation and the pending federal qui tam case. As part of the settlement, on April 22, 2016, Warner Chilcott Sales (US) LLC pled guilty to a charge of health care fraud in violation of 18 U.S.C. § 1347. The third complaint was filed in California state court and contains similar allegations as the other qui tam complaints and asserts additional causes of action under California state law. The State of California declined to intervene in this action. Warner Chilcott filed a motion to dismiss this complaint and has reached an agreement to settle the California action.
Forest. Forest received a subpoena dated August 5, 2013 from the U.S. Department of Health and Human Services, Office of Inspector General. The subpoena requests documents relating to the marketing and promotion of Bystolic ® , Savella ® , and Namenda ® , including with respect to speaker programs for these products. In February 2014, the U.S. District Court for the Eastern District of Wisconsin unsealed a qui tam complaint. The complaint asserts claims under the False Claims Act and contains allegations regarding off-label promotion of Bystolic ® and Savella ® and “kickbacks” provided to physicians to induce prescriptions of Bystolic ® , Savella ®
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, and Viibryd ®. Forest moved to dismiss the complaint. On January 6, 2015, the court granted Forest’s motion to dismiss the complaint. On February 5, 2016, the relator filed a second amended complaint. The U.S. Attorney’s Office declined to intervene in this action but has reserved the right to do so at a later date. On February 23 and 24, 2016, the parties participated in a non-binding mediation. As a result of the mediation, a framework now exists for the parties to reach an agreement to settle this matter. However, the framework is subject to a number of conditions, including additional approvals within the government and Forest. The settlement, if approved, would include the dismissal of the action pending in federal court in Wisconsin. The Company continues to cooperate with this investigation and to discuss these issues with the government.
Forest received a subpoena, dated April 29, 2015, from the U.S. Department of Health and Human Services, Office of Inspector General (“OIG”). The subpoena requests documents relating to Average Manufacturer (“AMP”) and Best Price calculations for several of its products. The Company intends to cooperate fully with the OIG’s requests.
In April 2014, the federal district court in Massachusetts unsealed a qui tam complaint which asserts claims under the False Claims Act and contains allegations regarding off-label promotion of Namenda®. The Company filed a motion to dismiss the relator’s Second Amended Complaint and the court granted in part and denied in part Forest’s motion, dismissing the False Claims Act conspiracy claim only. The U.S. Attorney’s Office declined to intervene in this action but has reserved the right to do so at a later date.
The Company intends to vigorously defend itself in the litigations. However, this case is in the early stage of litigation, it is impossible to predict with certain the outcome of this case, and the Company can offer no assurance as to when the lawsuit will be decided, whether the Company will be successful in its defense and whether any additional similar suits will be filed. If this claim is successful, such claim could adversely affect the Company and could have a material adverse effect on the Company’s business, financial condition, results of operation and cash flows.
Allergan. In December 2011, the federal district court in Pennsylvania issued an order partially unsealing the second amended qui tam complaint, filed by relators Herbert J. Nevyas, M.D. and Anita Nevyas-Wallace, M.D., to be informally provided to Allergan, Inc. The complaint asserts claims under Federal and State False Claims Acts and Federal and State Anti-Kickback Acts. On December 16, 2013, the court entered an order to unseal this qui tam action. On April 1, 2014, Allergan filed a motion to dismiss. On May 26, 2015, the court issued a ruling granting, in part, the motion to dismiss and denying it in part. Allergan filed an answer to the remaining claims on June 25, 2015. On July 7, 2015, the court scheduled trial in this matter for October 31, 2016.
On November 25, 2014, prior to the completion of its merger with Actavis plc (“Actavis”), Allergan, Inc. received a request for documents and information from the United States Securities and Exchange Commission (“SEC”) related to Actavis or Salix Pharmaceuticals, Inc. (“Salix”). On June 30, 2015, Allergan, Inc. received a subpoena from the SEC requesting documents related to Actavis or Salix. On June 30, 2015, Actavis received a subpoena from the SEC requesting documents related to Allergan. In January 2016, the SEC began meeting with current and former employees of Allergan and Actavis and indicated that its review focused on the content of Allergan, Inc.’s disclosures during the pendency of the tender offer by Valeant Pharmaceuticals International for Allergan, Inc.’s common stock. The company is cooperating fully with the SEC in responding to the subpoena.
Actavis. On June 25, 2015, the Company received a subpoena from the U.S. Department of Justice (“DOJ”), Antitrust Division seeking information relating to the marketing and pricing of certain of the Company’s generic products and communications with competitors about such products. The Company intends to cooperate fully with the DOJ’s requests.
Patent Settlement Investigations. The Company and various of its affiliates have received letters and investigatory subpoenas from the U.S. Federal Trade Commission (“FTC”) indicating that the FTC is conducting a nonpublic investigations into certain agreements the Company have made to settle patent disputes with other brand and generic pharmaceutical companies. The Company is cooperating in responding to the investigations.
Governmental Reimbursement and Drug Pricing Investigations and Litigation. The Company has also received investigatory subpoenas from the U.S. Attorney’s Office and various state agencies requesting information and documents relating to certain categories of drug pricing including, but not limited to, Average Wholesale Price (“AWP”), Wholesale Acquisition Cost (“WAC”), Average Manufacturer Price (“AMP”) and Best Price (“BP”). The Company intends to cooperate with this subpoena.
Beginning in 1999, the Company was informed by the DOJ that it, along with numerous other pharmaceutical companies, is a defendant in a qui tam action brought in 1995 under the U.S. False Claims Act. Since that time, the Company also received and responded to notices or subpoenas from the U.S. House Committee on Energy and Commerce as well as from Attorneys General of various states, including Florida, Nevada, New York, California and Texas, relating to pharmaceutical pricing issues and whether allegedly improper actions by pharmaceutical manufacturers led to excessive payments by Medicare and/or Medicaid. Other state and federal inquiries regarding pricing and reimbursement issues are anticipated.
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The Company and certain of its subsidiaries have also been named as defendants in various lawsuits filed by numerous states and qui tam relators, including Wisconsin, Kentucky, Illinois, Mississippi, Missouri, South Carolina, Utah, Kansas and Louisiana. These actions allege generally that the plaintiffs (all governmental entities) were overcharged for their share of Medicaid drug reimbursement costs as a result of reporting by manufacturers of AWP that did not correspond to actual provider costs of prescription drugs. In 2011, Watson settled certain claims made against it by a relator in a qui tam action brought against the Company on behalf of the United States. The settlement of that qui tam action resolved all claims on behalf of the United States asserted in that action except for claims relating to the federal share of Medicaid payments made by the States of Alabama, Alaska, Kentucky, Idaho, Illinois, South Carolina and Wisconsin. The Company subsequently settled all claims, including the claims on behalf of the United States, brought by Alabama. In addition, the Company has reached settlements with the states of the Louisiana, Missouri, Kansas and South Carolina. In addition, the Company has begun having discussions with the plaintiffs in the Illinois and Wisconsin actions about a possible resolution of those matters. The court in the Utah case dismissed that state’s claims against the Company. The case against Watson on behalf of Kentucky was tried in November 2011. The jury reached a verdict in Watson’s favor on each of Kentucky’s claims against Watson. An agreed form of judgment has been entered and the case now has been dismissed with prejudice. The case against Watson on behalf of Mississippi was tried from November 2012 through April 2013. On August 28, 2013, the court issued a ruling in favor of the state and awarded the state $12.4 million in compensatory damages and civil penalties, and on March 20, 2014 issued its ruling imposing an additional $17.9 million in punitive damages. Post-trial motions were filed and denied by the court. The Company is appealing both the original and punitive damage awards.
In addition, Forest and certain of its affiliates are defendants in four state court actions pending in Illinois, Mississippi, Utah and Wisconsin that contain similar actions as those raised in the actions against Watson. Discovery is ongoing in these actions. A trial in the Mississippi action is scheduled in August 2015. Forest and the other defendants filed a motion to dismiss Utah’s amended complaint. This motion to dismiss was denied in part, and discovery is proceeding. On February 17, 2014, the Wisconsin state court granted defendants’ motion to dismiss plaintiff’s Second Amended Complaint. However, the relator filed a separate action making the same basic allegations as in its amended complaint in the original action. The Company intends to continue to vigorously defend against these actions. At this time, the Company does not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole.
On December 28, 2015, a putative class action complaint was filed in state court in Pennsylvania on behalf of a putative class of private payers. The complaint alleges that manufacturers of generic drugs including Actavis Group, Forest Laboratories, Inc. and Watson Pharmaceuticals, Inc., caused plaintiffs to overpay for prescription drug products through the use of inflated AWPs. The complaint alleges violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, negligent misrepresentation/fraud, unjust enrichment, civil conspiracy and aiding and abetting. Defendants removed this action to the federal court in Pennsylvania under the Class Action Fairness Act. An additional complaint then was filed in state court in Pennsylvania on behalf an individual indirect purchaser containing similar allegations to the class complaint.
With regard to the remaining drug pricing actions, the Company believes that it has meritorious defenses and intends to vigorously defend itself in those actions. The Company continually monitors the status of these actions and may settle or otherwise resolve some or all of these matters on terms that the Company deems to be in its best interests. However, the Company can give no assurance that it will be able to settle the remaining actions on terms it deems reasonable, or that such settlements or adverse judgments in the remaining actions, if entered, will not exceed the amounts of the liability reserves. Additional actions by other states, cities and/or counties are anticipated. These actions and/or the actions described above, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
DESI Drug Reimbursement Litigation. In December 2009, the Company learned that numerous pharmaceutical companies, including certain subsidiaries of the Company, were named as defendants in a qui tam action pending in federal court in Massachusetts. The tenth amended complaint, which was served on certain of the Company’s subsidiaries, alleges that the defendants falsely reported to the United States that certain pharmaceutical products, including those subject to the Food and Drug Administration’s Drug Efficacy Study Implementation (“DESI”) review program, were eligible for Medicaid reimbursement and thereby allegedly caused false claims for payment to be made through the Medicaid program. The Company’s subsidiaries named in the action together with all other named defendants filed a Joint Motion to Dismiss the Tenth Amended Complaint on December 9, 2011. On February 25, 2013, the court granted the motion to dismiss as to all defendants. The plaintiff may appeal. On September 11, 2013, a similar action was filed against certain Company subsidiaries as well as Warner Chilcott and numerous other pharmaceutical company defendants by the State of Louisiana based on the same core set of allegations as asserted in the federal court action in Massachusetts. Defendants filed exceptions to plaintiffs’ complaint. On June 28, 2015, the State of Louisiana filed an amended complaint and defendants promptly moved to dismiss. On September 21, 2015, the court granted defendants’ motion to dismiss the amended complaint in its entirety. Additional actions alleging similar claims could be asserted. The Company believes that it has meritorious defenses to the claims and intends to vigorously defend itself against such allegations. However, these actions or similar
63
actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Medicaid Price Adjustments. The Company has notified the Centers for Medicare and Medicaid Services (“CMS”) that certain of the legacy Actavis group’s Medicaid price submissions require adjustment for the period 2007 through 2012. The Company is in the process of completing the resubmissions. Based on prevailing CMS practices the Company does not expect to incur penalties in connection with the resubmissions. With respect to periods prior to 2007, the Company has advised CMS that its records are insufficient to support a reliable recalculation of its price submissions, and has proposed not to recalculate the price submissions for such periods. Because there are insufficient records to support a reliable recalculation of its price submissions prior to 2007, at this time the amount of any potential liability related to the price submissions prior to 2007 is not estimable and the Company has not concluded that any liability for periods prior to 2007 is probable. The Company believes it has substantial meritorious positions and defenses with respect to these pricing resubmission matters. However, if CMS were to successfully pursue claims against the Company for the periods in question, such claims could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Hydrocortisone Investigation. On March 8, 2016, the Company and certain of its affiliates received notice from the UK Competition and Markets Authority (“CMA”) that it has launched a formal investigation under Section 25 of the Competition Act of 1998 (“CA98”) into suspected abuse of dominance by a Company subsidiary in relation to the supply of 10mg and 20mg hydrocortisone tablets. The CMA is investigating whether the conduct infringes the Chapter II prohibition of the CA98 and/or Article 102 of the Treaty on the Functioning of the European Union. The Company is fully cooperating with the investigation. This government investigation could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Paroxetine Investigation. On April 19, 2013, the UK Office of Fair Trading (which closed in April, 2014 in connection with a government restructuring and transferred responsibility for this matter to the U.K. CMA) issued a Statement of Objections against GlaxoSmithKline (“GSK”) and various generic drug companies, including Actavis UK Limited, formerly known as Alpharma Limited, now a subsidiary of the Company, alleging that GSK’s settlements with such generic drug companies improperly delayed generic entry of paroxetine, in violation of the United Kingdom’s competition laws. The Company has responded to the Statement of Objections, however, on February 12, 2016 the UK CMA imposed a fine on the Company. The Company believes it has substantial meritorious defenses to the allegations. However, an adverse determination in the matter could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Romanian Investigation. In July 2015, the Company received a subpoena as part of a nationwide investigation of the pharmaceutical industry conducted by the Romanian government. The purpose of the investigation is to gather documents and information, and to examine sponsorship arrangements concluded with certain oncologists and hematologists during the period from January 2012 through June 2015. The Company is fully cooperating with the investigation. This government investigation could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
The Company and its affiliates are involved in various other disputes, governmental and/or regulatory inspections, inquires, investigations and proceedings that could result in litigation, and other litigation matters that arise from time to time. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of operations, financial condition and cash flows.
NOTE 21 – Warner Chilcott Limited (“WCL”) Guarantor and Non-Guarantor Condensed Consolidating Financial Information
The following financial information is presented to segregate the financial results of WCL, Actavis Funding SCS, and Actavis, Inc. (the issuers of the long-term notes), the guarantor subsidiaries for the long-term notes and the non-guarantor subsidiaries. The guarantors jointly and severally, and fully and unconditionally, guarantee the Company’s obligation under the long-term notes.
The information includes elimination entries necessary to consolidate the guarantor and the non-guarantor subsidiaries. Investments in subsidiaries are accounted for using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries, equity and intercompany balances and transactions.
WCL, Actavis Capital S.a.r.l. and Actavis, Inc. are guarantors of the long-term notes.
64
Warner Chilcott Limited has revised its consolidating financial statements as previously presented in Footnote 20 of the March 31, 2015 Quarterly Report on Form 10-Q and its December 31, 2015 balance sheet in Footnote 26 of the Annual Report due to a change in the Company’s legal entity structure and other reclassifications that occurred during the three months ended March 31, 2016. As a result, prior period information has been recast to conform to the current period presentation. As part of the pending Teva Transaction, the Company anticipates further legal entity structure changes, which will impact the presentation of this footnote.
The following financial information presents the consolidating balance sheets as of March 31, 2016 and December 31, 2015, the related statement of operations for the three months ended March 31, 2016 and 2015 and the statement of cash flows for the three months ended March 31, 2016 and 2015.
65
Consolidating Balance Sheets
As of March 31, 2016
(Unaudited; in millions)
Current assets: |
|
Warner Chilcott Limited (Parent Guarantor) |
|
|
Actavis Capital S.a.r.l. (Guarantor) |
|
|
Actavis Funding SCS (Issuer) |
|
|
Actavis Inc. (Issuer and Guarantor) |
|
|
Non- guarantors |
|
|
Eliminations |
|
|
Consolidated Warner Chilcott Limited |
|
|||||||
Cash and cash equivalents |
|
$ |
0.1 |
|
|
$ |
29.8 |
|
|
$ |
- |
|
|
$ |
1.2 |
|
|
$ |
2,216.6 |
|
|
$ |
- |
|
|
$ |
2,247.7 |
|
Marketable securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13.0 |
|
|
|
- |
|
|
|
13.0 |
|
Accounts receivable, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,652.8 |
|
|
|
- |
|
|
|
2,652.8 |
|
Receivable from Parents |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
382.6 |
|
|
|
- |
|
|
|
382.6 |
|
Inventories, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,022.2 |
|
|
|
- |
|
|
|
1,022.2 |
|
Intercompany receivables |
|
|
- |
|
|
|
96,209.7 |
|
|
|
25,444.3 |
|
|
|
660.9 |
|
|
|
103,148.4 |
|
|
|
(225,463.3 |
) |
|
|
- |
|
Prepaid expenses and other current assets |
|
|
- |
|
|
|
5.0 |
|
|
|
- |
|
|
|
5.0 |
|
|
|
621.9 |
|
|
|
- |
|
|
|
631.9 |
|
Current assets held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,508.4 |
|
|
|
- |
|
|
|
3,508.4 |
|
Total current assets |
|
|
0.1 |
|
|
|
96,244.5 |
|
|
|
25,444.3 |
|
|
|
667.1 |
|
|
|
113,565.9 |
|
|
|
(225,463.3 |
) |
|
|
10,458.6 |
|
Property, plant and equipment, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3.3 |
|
|
|
1,599.1 |
|
|
|
- |
|
|
|
1,602.4 |
|
Investments and other assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12.6 |
|
|
|
392.9 |
|
|
|
- |
|
|
|
405.5 |
|
Investment in subsidiaries |
|
|
76,296.1 |
|
|
|
79,982.2 |
|
|
|
- |
|
|
|
4,752.3 |
|
|
|
- |
|
|
|
(161,030.6 |
) |
|
|
- |
|
Non current assets held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
39.4 |
|
|
|
10,597.4 |
|
|
|
- |
|
|
|
10,636.8 |
|
Deferred tax assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
77.6 |
|
|
|
- |
|
|
|
77.6 |
|
Product rights and other intangibles |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
66,535.8 |
|
|
|
- |
|
|
|
66,535.8 |
|
Goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
46,724.0 |
|
|
|
- |
|
|
|
46,724.0 |
|
Total assets |
|
$ |
76,296.2 |
|
|
$ |
176,226.7 |
|
|
$ |
25,444.3 |
|
|
$ |
5,474.7 |
|
|
$ |
239,492.7 |
|
|
$ |
(386,493.9 |
) |
|
$ |
136,440.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
- |
|
|
|
3.4 |
|
|
|
74.6 |
|
|
|
122.7 |
|
|
|
4,458.8 |
|
|
|
- |
|
|
|
4,659.5 |
|
Intercompany payables |
|
|
- |
|
|
|
92,469.5 |
|
|
|
873.1 |
|
|
|
9,780.7 |
|
|
|
122,340.0 |
|
|
|
(225,463.3 |
) |
|
|
- |
|
Payable to Parents |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,561.1 |
|
|
|
- |
|
|
|
1,561.1 |
|
Income taxes payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.6 |
|
|
|
67.9 |
|
|
|
- |
|
|
|
68.5 |
|
Current portion of long-term debt and capital leases |
|
|
- |
|
|
|
1,420.6 |
|
|
|
1,475.5 |
|
|
|
- |
|
|
|
1,119.6 |
|
|
|
- |
|
|
|
4,015.7 |
|
Current liabilities held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1.2 |
|
|
|
1,409.0 |
|
|
|
- |
|
|
|
1,410.2 |
|
Total current liabilities |
|
|
- |
|
|
|
93,893.5 |
|
|
|
2,423.2 |
|
|
|
9,905.2 |
|
|
|
130,956.4 |
|
|
|
(225,463.3 |
) |
|
|
11,715.0 |
|
Long-term debt and capital leases |
|
|
- |
|
|
|
6,693.8 |
|
|
|
23,020.6 |
|
|
|
4,251.1 |
|
|
|
4,586.3 |
|
|
|
- |
|
|
|
38,551.8 |
|
Other long-term liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1.9 |
|
|
|
1,022.1 |
|
|
|
- |
|
|
|
1,024.0 |
|
Non current liabilities held for sale |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
512.4 |
|
|
|
|
|
|
|
512.4 |
|
Other taxes payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20.1 |
|
|
|
757.3 |
|
|
|
- |
|
|
|
777.4 |
|
Deferred tax liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,563.9 |
|
|
|
- |
|
|
|
7,563.9 |
|
Total liabilities |
|
|
- |
|
|
|
100,587.3 |
|
|
|
25,443.8 |
|
|
|
14,178.3 |
|
|
|
145,398.4 |
|
|
|
(225,463.3 |
) |
|
|
60,144.5 |
|
Total equity |
|
|
76,296.2 |
|
|
|
75,639.4 |
|
|
|
0.5 |
|
|
|
(8,703.6 |
) |
|
|
94,094.3 |
|
|
|
(161,030.6 |
) |
|
|
76,296.2 |
|
Total liabilities and equity |
|
$ |
76,296.2 |
|
|
$ |
176,226.7 |
|
|
$ |
25,444.3 |
|
|
$ |
5,474.7 |
|
|
$ |
239,492.7 |
|
|
$ |
(386,493.9 |
) |
|
$ |
136,440.7 |
|
66
Consolidating Balance Sheets
As of December 31, 2015
($ in millions)
Current assets: |
|
Warner Chilcott Limited (Parent Guarantor) |
|
|
Actavis Capital S.a.r.l. (Guarantor) |
|
|
Actavis Funding SCS (Issuer) |
|
|
Actavis Inc. (Issuer and Guarantor) |
|
|
Non- guarantors |
|
|
Eliminations |
|
|
Consolidated Warner Chilcott Limited |
|
|||||||
Cash and cash equivalents |
|
$ |
- |
|
|
$ |
13.5 |
|
|
$ |
- |
|
|
$ |
2.0 |
|
|
$ |
1,020.7 |
|
|
$ |
- |
|
|
$ |
1,036.2 |
|
Marketable securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9.3 |
|
|
|
- |
|
|
|
9.3 |
|
Accounts receivable, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,401.6 |
|
|
|
- |
|
|
|
2,401.6 |
|
Receivable from Parents |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
457.3 |
|
|
|
- |
|
|
|
457.3 |
|
Inventories |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,009.7 |
|
|
|
- |
|
|
|
1,009.7 |
|
Intercompany receivables |
|
|
- |
|
|
|
94,999.2 |
|
|
|
25,225.6 |
|
|
|
302.4 |
|
|
|
101,864.8 |
|
|
|
(222,392.0 |
) |
|
|
- |
|
Prepaid expenses and other current assets |
|
|
- |
|
|
|
5.0 |
|
|
|
|
|
|
|
6.1 |
|
|
|
508.6 |
|
|
|
- |
|
|
|
519.7 |
|
Current assets held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,540.3 |
|
|
|
- |
|
|
|
3,540.3 |
|
Total current assets |
|
|
- |
|
|
|
95,017.7 |
|
|
|
25,225.6 |
|
|
|
310.5 |
|
|
|
110,812.3 |
|
|
|
(222,392.0 |
) |
|
|
8,974.1 |
|
Property, plant and equipment, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
34.3 |
|
|
|
1,539.6 |
|
|
|
- |
|
|
|
1,573.9 |
|
Investments and other assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33.6 |
|
|
|
384.3 |
|
|
|
- |
|
|
|
417.9 |
|
Investment in subsidiaries |
|
|
75,571.6 |
|
|
|
79,597.3 |
|
|
|
- |
|
|
|
5,417.2 |
|
|
|
- |
|
|
|
(160,586.1 |
) |
|
|
- |
|
Non current assets held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
45.8 |
|
|
|
10,495.5 |
|
|
|
- |
|
|
|
10,541.3 |
|
Deferred tax assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
49.5 |
|
|
|
- |
|
|
|
49.5 |
|
Product rights and other intangibles |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
67,931.7 |
|
|
|
- |
|
|
|
67,931.7 |
|
Goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
46,551.5 |
|
|
|
- |
|
|
|
46,551.5 |
|
Total assets |
|
$ |
75,571.6 |
|
|
$ |
174,615.0 |
|
|
$ |
25,225.6 |
|
|
$ |
5,841.4 |
|
|
$ |
237,764.4 |
|
|
$ |
(382,978.1 |
) |
|
$ |
136,039.9 |
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
- |
|
|
|
3.9 |
|
|
|
210.5 |
|
|
|
171.5 |
|
|
|
3,909.5 |
|
|
|
- |
|
|
|
4,295.4 |
|
Intercompany payables |
|
|
- |
|
|
|
92,093.5 |
|
|
|
526.3 |
|
|
|
9,245.0 |
|
|
|
120,527.2 |
|
|
|
(222,392.0 |
) |
|
|
- |
|
Payable to Parents |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,466.8 |
|
|
|
- |
|
|
|
1,466.8 |
|
Income taxes payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
44.1 |
|
|
|
10.1 |
|
|
|
- |
|
|
|
54.2 |
|
Current portion of long-term debt and capital leases |
|
|
- |
|
|
|
749.1 |
|
|
|
475.5 |
|
|
|
- |
|
|
|
1,171.9 |
|
|
|
- |
|
|
|
2,396.5 |
|
Current liabilities held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
23.3 |
|
|
|
1,468.5 |
|
|
|
- |
|
|
|
1,491.8 |
|
Total current liabilities |
|
|
- |
|
|
|
92,846.5 |
|
|
|
1,212.3 |
|
|
|
9,483.9 |
|
|
|
128,554.0 |
|
|
|
(222,392.0 |
) |
|
|
9,704.7 |
|
Long-term debt and capital leases |
|
|
- |
|
|
|
6,995.0 |
|
|
|
24,013.0 |
|
|
|
4,269.4 |
|
|
|
4,856.5 |
|
|
|
- |
|
|
|
40,133.9 |
|
Other long-term liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,262.0 |
|
|
|
- |
|
|
|
1,262.0 |
|
Non current liabilities for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
580.1 |
|
|
|
|
|
|
|
580.1 |
|
Other taxes payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
72.1 |
|
|
|
729.8 |
|
|
|
- |
|
|
|
801.9 |
|
Deferred tax liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,985.7 |
|
|
|
- |
|
|
|
7,985.7 |
|
Total liabilities |
|
|
- |
|
|
|
99,841.5 |
|
|
|
25,225.3 |
|
|
|
13,825.4 |
|
|
|
143,968.1 |
|
|
|
(222,392.0 |
) |
|
|
60,468.3 |
|
Total equity |
|
|
75,571.6 |
|
|
|
74,773.5 |
|
|
|
0.3 |
|
|
|
(7,984.0 |
) |
|
|
93,796.3 |
|
|
|
(160,586.1 |
) |
|
|
75,571.6 |
|
Total liabilities and equity |
|
$ |
75,571.6 |
|
|
$ |
174,615.0 |
|
|
$ |
25,225.6 |
|
|
$ |
5,841.4 |
|
|
$ |
237,764.4 |
|
|
$ |
(382,978.1 |
) |
|
$ |
136,039.9 |
|
67
Consolidating Statements of Operations
For the Three Months Ended March 31, 2016
(Unaudited; in millions)
|
|
Warner Chilcott Limited (Parent Guarantor) |
|
|
Actavis Capital S.a.r.l. (Guarantor) |
|
|
Actavis Funding SCS (Issuer) |
|
|
Actavis Inc. (Issuer and Guarantor) |
|
|
Non- guarantors |
|
|
Eliminations |
|
|
Consolidated Warner Chilcott Limited |
|
|||||||
Net revenues |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,795.9 |
|
|
$ |
- |
|
|
$ |
3,795.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
811.8 |
|
|
|
- |
|
|
|
811.8 |
|
Research and development |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
403.1 |
|
|
|
- |
|
|
|
403.1 |
|
Selling and marketing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
795.8 |
|
|
|
- |
|
|
|
795.8 |
|
General and administrative |
|
|
- |
|
|
|
0.5 |
|
|
|
- |
|
|
|
8.3 |
|
|
|
318.6 |
|
|
|
- |
|
|
|
327.4 |
|
Amortization |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,592.1 |
|
|
|
- |
|
|
|
1,592.1 |
|
In-process research and development impairments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6.0 |
|
|
|
- |
|
|
|
6.0 |
|
Asset sales and impairments, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1.7 |
) |
|
|
- |
|
|
|
(1.7 |
) |
Total operating expenses |
|
|
- |
|
|
|
0.5 |
|
|
|
- |
|
|
|
8.3 |
|
|
|
3,925.7 |
|
|
|
- |
|
|
|
3,934.5 |
|
Operating income / (loss) |
|
|
- |
|
|
|
(0.5 |
) |
|
|
- |
|
|
|
(8.3 |
) |
|
|
(129.8 |
) |
|
|
- |
|
|
|
(138.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income / (expense), net |
|
|
- |
|
|
|
481.5 |
|
|
|
0.2 |
|
|
|
(39.1 |
) |
|
|
(772.3 |
) |
|
|
- |
|
|
|
(329.7 |
) |
Other income (expense), net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.5 |
|
|
|
- |
|
|
|
0.5 |
|
Total other income (expense), net |
|
|
- |
|
|
|
481.5 |
|
|
|
0.2 |
|
|
|
(39.1 |
) |
|
|
(771.8 |
) |
|
|
- |
|
|
|
(329.2 |
) |
Income / (loss) before income taxes and noncontrolling interest |
|
|
- |
|
|
|
481.0 |
|
|
|
0.2 |
|
|
|
(47.4 |
) |
|
|
(901.6 |
) |
|
|
- |
|
|
|
(467.8 |
) |
Provision for income taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7.3 |
|
|
|
(409.3 |
) |
|
|
- |
|
|
|
(402.0 |
) |
(Earnings) / losses of equity interest subsidiaries |
|
|
(270.9 |
) |
|
|
202.0 |
|
|
|
- |
|
|
|
(327.6 |
) |
|
|
- |
|
|
|
396.5 |
|
|
|
- |
|
Net (loss) from continuing operations, net of tax |
|
$ |
270.9 |
|
|
$ |
279.0 |
|
|
$ |
0.2 |
|
|
$ |
272.9 |
|
|
$ |
(492.3 |
) |
|
$ |
(396.5 |
) |
|
$ |
(65.8 |
) |
Income / (loss) from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
|
337.4 |
|
|
|
— |
|
|
|
337.4 |
|
Net (loss) |
|
$ |
270.9 |
|
|
$ |
279.0 |
|
|
$ |
0.2 |
|
|
$ |
272.9 |
|
|
$ |
(154.9 |
) |
|
$ |
(396.5 |
) |
|
$ |
271.6 |
|
(Income) / loss attributable to noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.7 |
) |
|
|
- |
|
|
|
(0.7 |
) |
Net income / (loss) attributable to ordinary shareholders |
|
$ |
270.9 |
|
|
$ |
279.0 |
|
|
$ |
0.2 |
|
|
$ |
272.9 |
|
|
$ |
(155.6 |
) |
|
$ |
(396.5 |
) |
|
$ |
270.9 |
|
Other comprehensive income / (loss) |
|
|
522.5 |
|
|
|
586.9 |
|
|
|
- |
|
|
|
- |
|
|
|
522.5 |
|
|
|
(1,109.4 |
) |
|
|
522.5 |
|
Comprehensive income / (loss) |
|
$ |
793.4 |
|
|
$ |
865.9 |
|
|
$ |
0.2 |
|
|
$ |
272.9 |
|
|
$ |
366.9 |
|
|
$ |
(1,505.9 |
) |
|
$ |
793.4 |
|
68
Consolidating Statements of Operations
For the Three Months Ended March 31, 2015
(Unaudited; in millions)
|
|
Warner Chilcott Limited (Parent Guarantor) |
|
|
Actavis Capital S.a.r.l. (Guarantor) |
|
|
Actavis Funding SCS (Issuer) |
|
|
Actavis Inc. (Issuer and Guarantor) |
|
|
Non- guarantors |
|
|
Eliminations |
|
|
Consolidated Warner Chilcott Limited |
|
|||||||
Net revenues |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,562.6 |
|
|
$ |
- |
|
|
$ |
2,562.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,020.1 |
|
|
|
- |
|
|
|
1,020.1 |
|
Research and development |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
317.7 |
|
|
|
- |
|
|
|
317.7 |
|
Selling and marketing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
569.6 |
|
|
|
- |
|
|
|
569.6 |
|
General and administrative |
|
|
- |
|
|
|
212.2 |
|
|
|
16.0 |
|
|
|
9.8 |
|
|
|
298.9 |
|
|
|
- |
|
|
|
536.9 |
|
Amortization |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
787.8 |
|
|
|
- |
|
|
|
787.8 |
|
Asset sales and impairments, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4.6 |
|
|
|
- |
|
|
|
4.6 |
|
Total operating expenses |
|
|
- |
|
|
|
212.2 |
|
|
|
16.0 |
|
|
|
9.8 |
|
|
|
2,998.7 |
|
|
|
- |
|
|
|
3,236.7 |
|
Operating income / (loss) |
|
|
- |
|
|
|
(212.2 |
) |
|
|
(16.0 |
) |
|
|
(9.8 |
) |
|
|
(436.1 |
) |
|
|
- |
|
|
|
(674.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income / (expense), net |
|
|
- |
|
|
|
52.4 |
|
|
|
(17.1 |
) |
|
|
(43.8 |
) |
|
|
(161.6 |
) |
|
|
- |
|
|
|
(170.1 |
) |
Other income (expense), net |
|
|
- |
|
|
|
(263.5 |
) |
|
|
31.0 |
|
|
|
0.1 |
|
|
|
34.5 |
|
|
|
- |
|
|
|
(197.9 |
) |
Total other income (expense), net |
|
|
- |
|
|
|
(211.1 |
) |
|
|
13.9 |
|
|
|
(43.7 |
) |
|
|
(127.1 |
) |
|
|
- |
|
|
|
(368.0 |
) |
Income / (loss) before income taxes and noncontrolling interest |
|
|
- |
|
|
|
(423.3 |
) |
|
|
(2.1 |
) |
|
|
(53.5 |
) |
|
|
(563.2 |
) |
|
|
- |
|
|
|
(1,042.1 |
) |
Provision for income taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(22.5 |
) |
|
|
(236.5 |
) |
|
|
- |
|
|
|
(259.0 |
) |
(Earnings) / losses of equity interest subsidiaries |
|
|
508.4 |
|
|
|
(9.7 |
) |
|
|
- |
|
|
|
(244.0 |
) |
|
|
- |
|
|
|
(254.7 |
) |
|
|
- |
|
Net (loss) from continuing operations, net of tax |
|
$ |
(508.4 |
) |
|
$ |
(413.6 |
) |
|
$ |
(2.1 |
) |
|
$ |
213.0 |
|
|
$ |
(326.7 |
) |
|
$ |
254.7 |
|
|
$ |
(783.1 |
) |
Income / (loss) from discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
274.4 |
|
|
|
- |
|
|
|
274.4 |
|
Net (loss) |
|
$ |
(508.4 |
) |
|
$ |
(413.6 |
) |
|
$ |
(2.1 |
) |
|
$ |
213.0 |
|
|
$ |
(52.3 |
) |
|
$ |
254.7 |
|
|
$ |
(508.7 |
) |
(Income) / loss attributable to noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.3 |
|
|
|
- |
|
|
|
0.3 |
|
Net income / (loss) attributable to ordinary shareholders |
|
$ |
(508.4 |
) |
|
$ |
(413.6 |
) |
|
$ |
(2.1 |
) |
|
$ |
213.0 |
|
|
$ |
(52.0 |
) |
|
$ |
254.7 |
|
|
$ |
(508.4 |
) |
Other Comprehensive income / (loss) |
|
|
(317.9 |
) |
|
|
(230.9 |
) |
|
|
- |
|
|
|
- |
|
|
|
(317.9 |
) |
|
|
548.8 |
|
|
|
(317.9 |
) |
Comprehensive income / (loss) |
|
$ |
(826.3 |
) |
|
$ |
(644.5 |
) |
|
$ |
(2.1 |
) |
|
$ |
213.0 |
|
|
$ |
(369.9 |
) |
|
$ |
803.5 |
|
|
$ |
(826.3 |
) |
69
Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2016
(Unaudited; in millions)
|
|
Warner Chilcott Limited (Parent Guarantor) |
|
|
Actavis Capital S.a.r.l. (Guarantor) |
|
|
Actavis Funding SCS (Issuer) |
|
|
Actavis Inc. (Issuer and Guarantor) |
|
|
Non- guarantors |
|
|
Eliminations |
|
|
Consolidated Warner Chilcott Limited |
|
|||||||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income / (loss) |
|
$ |
270.9 |
|
|
$ |
279.0 |
|
|
$ |
0.2 |
|
|
$ |
272.9 |
|
|
$ |
(154.9 |
) |
|
$ |
(396.5 |
) |
|
$ |
271.6 |
|
Reconciliation to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Earnings) / losses of equity interest subsidiaries |
|
|
(270.9 |
) |
|
|
202.0 |
|
|
|
- |
|
|
|
(327.6 |
) |
|
|
- |
|
|
|
396.5 |
|
|
|
- |
|
Depreciation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.5 |
|
|
|
41.6 |
|
|
|
- |
|
|
|
42.1 |
|
Amortization |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,592.1 |
|
|
|
- |
|
|
|
1,592.1 |
|
Provision for inventory reserve |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
59.2 |
|
|
|
- |
|
|
|
59.2 |
|
Share-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
99.0 |
|
|
|
- |
|
|
|
99.0 |
|
Deferred income tax benefit |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(519.2 |
) |
|
|
- |
|
|
|
(519.2 |
) |
In-process research and development impairments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6.0 |
|
|
|
- |
|
|
|
6.0 |
|
Loss / (gain) on asset sales and impairments, net |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1.7 |
) |
|
|
|
|
|
|
(1.7 |
) |
Amortization of inventory step-up |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
42.4 |
|
|
|
- |
|
|
|
42.4 |
|
Amortization of deferred financing costs |
|
|
- |
|
|
|
1.8 |
|
|
|
6.1 |
|
|
|
- |
|
|
|
2.1 |
|
|
|
- |
|
|
|
10.0 |
|
Contingent consideration adjustments, including accretion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33.6 |
|
|
|
- |
|
|
|
33.6 |
|
Dividends from subsidiaries |
|
|
69.6 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(69.6 |
) |
|
|
- |
|
Other, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9.1 |
) |
|
|
- |
|
|
|
(9.1 |
) |
Changes in assets and liabilities (net of effects of acquisitions) |
|
|
0.1 |
|
|
|
(834.5 |
) |
|
|
(6.3 |
) |
|
|
54.5 |
|
|
|
476.4 |
|
|
|
- |
|
|
|
(309.8 |
) |
Net cash provided by operating activities |
|
|
69.7 |
|
|
|
(351.7 |
) |
|
|
- |
|
|
|
0.3 |
|
|
|
1,667.5 |
|
|
|
(69.6 |
) |
|
|
1,316.2 |
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property plant and equipment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1.1 |
) |
|
|
(83.8 |
) |
|
|
- |
|
|
|
(84.9 |
) |
Additions to product rights and other intangibles |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Additions to investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Proceeds from sale of investments and other assets |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19.0 |
|
|
|
- |
|
|
|
19.0 |
|
Proceeds from sales of property, plant and equipment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12.1 |
|
|
|
- |
|
|
|
12.1 |
|
Acquisitions of business, net of cash acquired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net cash (used in) investing activities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1.1 |
) |
|
|
(52.7 |
) |
|
|
- |
|
|
|
(53.8 |
) |
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings of long-term indebtedness |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Proceeds from borrowings on credit facility |
|
|
- |
|
|
|
900.0 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
900.0 |
|
Debt issuance and other financing costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Payments on debt, including capital lease obligations |
|
|
- |
|
|
|
(532.0 |
) |
|
|
- |
|
|
|
- |
|
|
|
(322.2 |
) |
|
|
- |
|
|
|
(854.2 |
) |
Payments of contingent consideration |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(32.3 |
) |
|
|
- |
|
|
|
(32.3 |
) |
Dividends to Parent |
|
|
(69.6 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(69.6 |
) |
|
|
69.6 |
|
|
|
(69.6 |
) |
Contribution from Parent |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net cash provided by / (used in) financing activities |
|
|
(69.6 |
) |
|
|
368.0 |
|
|
|
- |
|
|
|
- |
|
|
|
(424.1 |
) |
|
|
69.6 |
|
|
|
(56.1 |
) |
Effect of currency exchange rate changes on cash and cash equivalents |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5.2 |
|
|
|
- |
|
|
|
5.2 |
|
Movement in cash held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net increase / (decrease) in cash and cash equivalents |
|
|
0.1 |
|
|
|
16.3 |
|
|
|
- |
|
|
|
(0.8 |
) |
|
|
1,195.9 |
|
|
|
- |
|
|
|
1,211.5 |
|
Cash and cash equivalents at beginning of period |
|
|
- |
|
|
|
13.5 |
|
|
|
- |
|
|
|
2.0 |
|
|
|
1,020.7 |
|
|
|
- |
|
|
|
1,036.2 |
|
Cash and cash equivalents at end of period |
|
$ |
0.1 |
|
|
$ |
29.8 |
|
|
$ |
- |
|
|
$ |
1.2 |
|
|
$ |
2,216.6 |
|
|
$ |
- |
|
|
$ |
2,247.7 |
|
70
Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2015
(Unaudited; in millions)
|
|
Warner Chilcott Limited (Parent Guarantor) |
|
|
Actavis Capital S.a.r.l. (Guarantor) |
|
|
Actavis Funding SCS (Issuer) |
|
|
Actavis Inc. (Issuer and Guarantor) |
|
|
Non- guarantors |
|
|
Eliminations |
|
|
Consolidated Warner Chilcott Limited |
|
|||||||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income / (loss) |
|
$ |
(508.4 |
) |
|
$ |
(413.6 |
) |
|
$ |
(2.1 |
) |
|
$ |
213.0 |
|
|
$ |
(52.3 |
) |
|
$ |
254.7 |
|
|
$ |
(508.7 |
) |
Reconciliation to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Earnings) / losses of equity interest subsidiaries |
|
|
508.4 |
|
|
|
(9.7 |
) |
|
|
- |
|
|
|
(244.0 |
) |
|
|
- |
|
|
|
(254.7 |
) |
|
|
- |
|
Depreciation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.1 |
|
|
|
57.1 |
|
|
|
- |
|
|
|
57.2 |
|
Amortization |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
925.4 |
|
|
|
- |
|
|
|
925.4 |
|
Provision for inventory reserve |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
30.3 |
|
|
|
- |
|
|
|
30.3 |
|
Share-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12.0 |
|
|
|
213.5 |
|
|
|
- |
|
|
|
225.5 |
|
Deferred income tax benefit |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(304.3 |
) |
|
|
- |
|
|
|
(304.3 |
) |
In-process research and development impairments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3.7 |
|
|
|
- |
|
|
|
3.7 |
|
Loss / (gain) on asset sales and impairments, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
54.1 |
|
|
|
- |
|
|
|
54.1 |
|
Amortization of inventory step-up |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
212.9 |
|
|
|
- |
|
|
|
212.9 |
|
Amortization of deferred financing costs |
|
|
- |
|
|
|
264.2 |
|
|
|
2.5 |
|
|
|
1.0 |
|
|
|
0.6 |
|
|
|
- |
|
|
|
268.3 |
|
Contingent consideration adjustments, including accretion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28.8 |
|
|
|
- |
|
|
|
28.8 |
|
Other, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6.5 |
) |
|
|
- |
|
|
|
(6.5 |
) |
Changes in assets and liabilities (net of effects of acquisitions) |
|
|
(0.1 |
) |
|
|
(5,654.9 |
) |
|
|
(20,812.3 |
) |
|
|
30.2 |
|
|
|
25,977.1 |
|
|
|
- |
|
|
|
(460.0 |
) |
Net cash provided by operating activities |
|
|
(0.1 |
) |
|
|
(5,814.0 |
) |
|
|
(20,811.9 |
) |
|
|
12.3 |
|
|
|
27,140.4 |
|
|
|
- |
|
|
|
526.7 |
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property plant and equipment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(11.5 |
) |
|
|
(125.1 |
) |
|
|
- |
|
|
|
(136.6 |
) |
Additions to product rights and other intangibles |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8.5 |
) |
|
|
- |
|
|
|
(8.5 |
) |
Additions to investments |
|
|
(9,000.8 |
) |
|
|
(9,000.8 |
) |
|
|
- |
|
|
|
- |
|
|
|
(15.0 |
) |
|
|
18,001.6 |
|
|
|
(15.0 |
) |
Proceeds from sale of investments and other assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
790.5 |
|
|
|
- |
|
|
|
790.5 |
|
Proceeds from sales of property, plant and equipment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
74.9 |
|
|
|
- |
|
|
|
74.9 |
|
Acquisitions of business, net of cash acquired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(34,646.2 |
) |
|
|
- |
|
|
|
(34,646.2 |
) |
Net cash (used in) investing activities |
|
|
(9,000.8 |
) |
|
|
(9,000.8 |
) |
|
|
- |
|
|
|
(11.5 |
) |
|
|
(33,929.4 |
) |
|
|
18,001.6 |
|
|
|
(33,940.9 |
) |
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings of long-term indebtedness |
|
|
- |
|
|
|
5,500.0 |
|
|
|
20,955.6 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
26,455.6 |
|
Proceeds from borrowings on credit facility |
|
|
- |
|
|
|
2,810.0 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,810.0 |
|
Debt issuance and other financing costs |
|
|
- |
|
|
|
(167.1 |
) |
|
|
(143.7 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(310.8 |
) |
Payments on debt, including capital lease obligations |
|
|
- |
|
|
|
(2,334.1 |
) |
|
|
- |
|
|
|
- |
|
|
|
(325.9 |
) |
|
|
- |
|
|
|
(2,660.0 |
) |
Payments of contingent consideration |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(24.6 |
) |
|
|
- |
|
|
|
(24.6 |
) |
Contribution from Parent |
|
|
9,000.8 |
|
|
|
9,000.8 |
|
|
|
- |
|
|
|
- |
|
|
|
9,000.8 |
|
|
|
(18,001.6 |
) |
|
|
9,000.8 |
|
Net cash provided by / (used in) financing activities |
|
|
9,000.8 |
|
|
|
14,809.6 |
|
|
|
20,811.9 |
|
|
|
- |
|
|
|
8,650.3 |
|
|
|
(18,001.6 |
) |
|
|
35,271.0 |
|
Effect of currency exchange rate changes on cash and cash equivalents |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4.8 |
) |
|
|
- |
|
|
|
(4.8 |
) |
Movement in cash held for sale |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net increase / (decrease) in cash and cash equivalents |
|
|
(0.1 |
) |
|
|
(5.2 |
) |
|
|
- |
|
|
|
0.8 |
|
|
|
1,856.5 |
|
|
|
- |
|
|
|
1,852.0 |
|
Cash and cash equivalents at beginning of period |
|
|
0.1 |
|
|
|
5.5 |
|
|
|
- |
|
|
|
1.5 |
|
|
|
237.2 |
|
|
|
- |
|
|
|
244.3 |
|
Cash and cash equivalents at end of period |
|
$ |
- |
|
|
$ |
0.3 |
|
|
$ |
- |
|
|
$ |
2.3 |
|
|
$ |
2,093.7 |
|
|
$ |
- |
|
|
$ |
2,096.3 |
|
NOTE 22 – Subsequent Events
On November 23, 2015, the Company announced that it entered into a definitive merger agreement (the “Pfizer Agreement”) under which Pfizer Inc. (“Pfizer”), a global innovative biopharmaceutical company, and Allergan plc would merge in a stock and cash transaction. On April 6, 2016, the Company announced that its merger agreement with Pfizer was terminated by mutual agreement. In connection with the termination of the merger agreement, Pfizer has agreed to pay the Company $150.0 million for reimbursement of expenses associated with the transaction which will be reported as other income in the three months ending June 30, 2016.
71
On April 6, 2016, the Company announced that they entered an agreement with Heptares Therapeutics (“Heptares”) under which the Company will license exclusive global rights to a broad portfolio of novel subtype-selective muscarinic receptor agonists in development for the treatment of major neurological disorders, including Alzheimer's disease. Under the terms of the agreement, Heptares will receive an upfront payment of $125.0 million and is eligible to receive contingent milestone payments of up to approximately $665.0 million associated with the successful Phase 1, 2 and 3 clinical development studies and the launch of the first three licensed compounds for multiple indications and up to approximately $2.575 billion associated with achieving certain annual sales thresholds during the several years following launch. In addition, Heptares is eligible to receive royalties on net sales of all products resulting from the partnership.
On April 21, 2016, the Company acquired Topokine Therapeutics (“Topokine”), a privately held, clinical-stage biotechnology company focused on developing topical medicines for fat reduction. Under the terms of the agreement, the Company acquired Topokine for an upfront payment of $85.0 million and success-based development and sales milestones of up to $260.0 million for XAF5, a first-in-class topical agent in late-stage development for the treatment of steatoblepharon, also known as undereye bags.
The following discussion of our financial condition and the results of operations should be read in conjunction with the “Consolidated Financial Statements” and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015 (the “Annual Report”). This discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, those identified under “Risk Factors” in our Annual Report, and elsewhere in this Quarterly Report.
References throughout to “we,” “our,” “us,” the “Company” or “Allergan” refer to financial information and transactions of Allergan plc. References to “Warner Chilcott Limited” refer to Warner Chilcott Limited, the Company’s indirect wholly-owned subsidiary, and, unless the context otherwise requires, its subsidiaries. Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc, the ultimate parent of the group. The results of Warner Chilcott Limited are consolidated into the results of Allergan plc. Due to the deminimis activity between Allergan plc and Warner Chilcott Limited, references throughout this filing relate to both Allergan plc and Warner Chilcott Limited. Warner Chilcott Limited representations relate only to itself and not to any other company.
Overview
Allergan plc is focused on developing, manufacturing and commercializing innovative branded pharmaceuticals (“brand”, “branded” or “specialty brand”), high-quality generic and over-the-counter (“OTC”) medicines and biologic products for patients around the world.
Allergan markets a portfolio of best-in-class products that provide valuable treatments for the central nervous system, eye care, medical aesthetics, gastroenterology, women's health, urology, cardiovascular and anti-infective therapeutic categories, and operates the world's third-largest global generics business, providing patients around the globe with increased access to affordable, high-quality medicines. Allergan is an industry leader in research and development, with one of the broadest development pipelines in the pharmaceutical industry and a leading position in the submission of generic product applications globally.
With commercial operations in approximately 100 countries, Allergan is committed to working with physicians, healthcare providers and patients to deliver innovative and meaningful treatments that help people around the world live longer, healthier lives. As a result of the Allergan Acquisition (defined below) which closed on March 17, 2015, the Company expanded its franchises to include ophthalmology, neurosciences and medical aesthetics/dermatology/plastic surgery, which complements the Company’s existing central nervous system, gastroenterology, women’s health and urology franchises. The combined company benefits significantly from Allergan, Inc’s. (“Legacy Allergan”) global brand equity and consumer awareness of key products, including Botox® and Restasis®. The Allergan Acquisition also expanded our presence and market and product reach across many international markets, with strengthened commercial positions across Canada, Europe, Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America.
The results of our discontinued operations include the results of our generic product development, manufacturing and distribution of off-patent pharmaceutical products, established international brands marketed similar to generic products and out-license generic pharmaceutical products primarily in Europe through our Medis third-party business.
72
On July 26, 2015 we entered into a master purchase agreement (the “Teva Agreement”), under which Teva Pharmaceutical Industries Ltd. (“Teva”) agreed to acquire our global generic pharmaceuticals business and certain other assets (the “Teva Transaction”). Under the Teva Agreement, upon the closing of the Teva Transaction, we will receive $33.75 billion in cash and 100.3 million Teva ordinary shares (or American Depository Shares with respect thereto), which approximates $6.75 billion in Teva stock using the then-current stock price at the time the Teva Transaction was announced, in exchange for which Teva will acquire our global generics business, including the United States (“U.S.”) and international generic commercial units, our third-party supplier Medis, our global generic manufacturing operations, our global generic research and development (“R&D”) unit, our international OTC commercial unit (excluding OTC eye care products) and some established international brands. The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2016. As a result of the transaction, and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) number 2014-08 “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, the Company is accounting for the assets and liabilities to be divested as held for sale. Further, the financial results of the business held for sale have been reclassified to discontinued operations for all periods presented in our consolidated financial statements.
2016 Transactions
The following are the material transactions that were completed in the three months ended March 31, 2016.
Licenses and Asset Acquisitions
Anterios
On January 6, 2016, the Company acquired Anterios, Inc. (“Anterios”), a clinical stage biopharmaceutical company developing a next generation delivery system and botulinum toxin-based prescription products. Under the terms of the agreement, the Company acquired Anterios for an upfront net payment of approximately $90.0 million and potential development and commercialization milestone payments related to an investigational topical formulation of botulinum toxin type A in development for the potential treatment of hyperhidrosis, acne, and crow’s feet lines and the related NDS™, Anterios' proprietary platform delivery technology that enables local, targeted delivery of neurotoxins through the skin without the need for injections (“the Anterios Transaction”). Total future milestone payments could amount to $387.5 million. The Company concluded based on the stage of development of the assets, the lack of acquired employees as well as certain other inputs and processes that the transaction did not qualify as a business. The total upfront net payment of approximately $90.0 million was expensed as a component of R&D expense and the future milestones will be recorded when the payment becomes probable.
2015 Transactions
The following are the material transactions that were completed in the year ended December 31, 2015.
Acquisitions
AqueSys
On October 16, 2015, the Company acquired AqueSys, Inc. (“AqueSys”), a private, clinical-stage medical device company focused on developing ocular implants that reduce intraocular pressure (“IOP”) associated with glaucoma, in an all-cash transaction, which is being accounted for as a business acquisition. Under the terms of the agreement, the Company acquired AqueSys for an acquisition accounting purchase price of $298.9 million, including $193.5 million for the estimated fair value of contingent consideration relating to the regulatory approval and commercialization milestone payments. The Company acquired AqueSys for its lead development program, including XEN45, a soft shunt that is implanted in the sub conjunctival space in the eye through a minimally invasive procedure with a single use, pre-loaded proprietary injector (the “AqueSys Acquisition”).
Kythera
On October 1, 2015, the Company acquired Kythera Biopharmaceuticals (“Kythera”), for $75 per share, or an acquisition accounting purchase price of $2,089.5 million (the “Kythera Acquisition”), which is being accounted for as a business acquisition. Kythera was focused on the discovery, development and commercialization of novel prescription aesthetic products. Kythera’s lead product, Kybella® injection, is the first and only Food and Drug Administration (“FDA”) approved, non-surgical treatment for moderate to severe submental fullness, commonly referred to as double chin.
73
On May 29, 2015 the Company acquired Auden Mckenzie Holdings Limited (“Auden”), a company specializing in the development, licensing and marketing of niche generic medicines and proprietary brands in the United Kingdom (“UK”) and across Europe for approximately 323.7 million British Pounds, or $495.9 million (the “Auden Acquisition”). The assets and liabilities acquired, as well as the results of operations for the acquired Auden business are part of the assets being divested in the Teva Transaction and are included as a component of income from discontinued operations. In addition the acquired financial position is included in assets and liabilities held for sale.
Allergan
On March 17, 2015, the Company acquired Legacy Allergan for approximately $77.0 billion including outstanding indebtedness assumed of $2.2 billion, cash consideration of $40.1 billion and equity consideration of $34.7 billion, which includes outstanding equity awards (the “Allergan Acquisition”). Under the terms of the agreement, Legacy Allergan shareholders received 111.2 million of the Company’s ordinary shares, 7.0 million of the Company’s non-qualified stock options and 0.5 million of the Company’s share units. The addition of Allergan Inc.’s therapeutic franchises in ophthalmology, neurosciences and medical aesthetics/dermatology/plastic surgery complements the Company’s existing central nervous system, gastroenterology, women’s health and urology franchises. The combined company will also benefit significantly from Legacy Allergan’s global brand equity and consumer awareness of key products, including Botox® and Restasis®. The transaction also expands our presence and market and product reach across many international markets, with strengthened commercial positions across Canada, Europe, Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America.
The contribution from the acquisition of Legacy Allergan for the three months ended March 31, 2016 and 2015 is as follows ($ in millions):
|
|
Three Months Ended March 31, 2016 |
|
|||||||||||||||||
|
|
US |
|
|
US Medical |
|
|
International |
|
|
|
|
|
|
|
|
|
|||
|
|
Brands |
|
|
Aesthetics |
|
|
Brands |
|
|
Corporate |
|
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
841.3 |
|
|
$ |
438.5 |
|
|
$ |
625.7 |
|
|
$ |
1.6 |
|
|
$ |
1,907.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
39.1 |
|
|
|
29.7 |
|
|
|
88.6 |
|
|
|
28.5 |
|
|
|
185.9 |
|
Selling and marketing |
|
|
142.2 |
|
|
|
97.8 |
|
|
|
166.5 |
|
|
|
22.6 |
|
|
|
429.1 |
|
General and administrative |
|
|
24.9 |
|
|
|
13.0 |
|
|
|
25.6 |
|
|
|
118.0 |
|
|
|
181.5 |
|
Contribution |
|
$ |
635.1 |
|
|
$ |
298.0 |
|
|
$ |
345.0 |
|
|
$ |
(167.5 |
) |
|
$ |
1,110.6 |
|
(1) |
Excludes amortization and impairment of acquired intangibles including product rights. |
|
|
Three Months Ended March 31, 2015 |
|
|||||||||||||||||
|
|
US |
|
|
US Medical |
|
|
International |
|
|
|
|
|
|
|
|
|
|||
|
|
Brands |
|
|
Aesthetics |
|
|
Brands |
|
|
Corporate |
|
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
105.6 |
|
|
$ |
68.2 |
|
|
$ |
84.6 |
|
|
$ |
- |
|
|
$ |
258.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
2.9 |
|
|
|
3.8 |
|
|
|
15.0 |
|
|
|
95.3 |
|
|
|
117.0 |
|
Selling and marketing |
|
|
25.1 |
|
|
|
13.8 |
|
|
|
28.4 |
|
|
|
82.4 |
|
|
|
149.7 |
|
General and administrative |
|
|
3.4 |
|
|
|
2.7 |
|
|
|
5.3 |
|
|
|
396.5 |
|
|
|
407.9 |
|
Contribution |
|
$ |
74.2 |
|
|
$ |
47.9 |
|
|
$ |
35.9 |
|
|
$ |
(574.2 |
) |
|
$ |
(416.2 |
) |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights. |
74
As a result of the acquisition, the Company incurred the following transaction and integration costs in the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, 2016 |
|
|
Three Months Ended March 31, 2015 |
|
||
Cost of sales |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Legacy Allergan employees |
|
$ |
3.1 |
|
|
$ |
6.9 |
|
Acquisition, integration and restructuring related charges |
|
|
3.9 |
|
|
|
10.9 |
|
Research and development |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Legacy Allergan employees |
|
|
13.9 |
|
|
|
55.5 |
|
Acquisition, integration and restructuring related charges |
|
|
2.8 |
|
|
|
59.9 |
|
Selling and marketing |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Legacy Allergan employees |
|
|
20.5 |
|
|
|
23.2 |
|
Acquisition, integration and restructuring related charges |
|
|
5.0 |
|
|
|
50.0 |
|
General and administrative |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Legacy Allergan employees |
|
|
9.9 |
|
|
|
183.0 |
|
Acquisition-related expenditures |
|
|
- |
|
|
|
65.5 |
|
Acquisition, integration and restructuring related charges |
|
|
39.8 |
|
|
|
103.7 |
|
Other (expense) income |
|
|
|
|
|
|
|
|
Bridge loan facilities expense |
|
|
- |
|
|
|
(263.0 |
) |
Interest rate lock |
|
|
- |
|
|
|
31.0 |
|
Total transaction and integration costs |
|
$ |
98.9 |
|
|
$ |
790.6 |
|
Licenses and Asset Acquisitions
Migraine License
On August 17, 2015, the Company entered into an agreement with Merck & Co. (“Merck”) under which the Company acquired the exclusive worldwide rights to Merck’s early development stage investigational small molecule oral calcitonin gene-related peptide receptor antagonists, which are being developed for the treatment and prevention of migraines (the “Merck Transaction”). The Merck Transaction is being accounted for as an asset acquisition. The Company acquired these rights for an upfront charge of $250.0 million. The Company concluded based on the stage of development of the assets, the lack of acquired employees and manufacturing as well as certain other inputs and processes that the transaction did not qualify as a business. The Company paid $125.0 million in the year ended December 31, 2015 and the remaining $125.0 million was paid in April 2016. Additionally, Merck is owed contingent payments based on commercial and development milestones of up to $965.0 million as well as royalties.
Divestitures
Respiratory Business
As part of the Forest Acquisition (defined below), we acquired certain assets that comprised Legacy Forest’s branded respiratory business in the U.S. and Canada (the “Respiratory Business”). During the year ended December 31, 2014, we held for sale respiratory assets of $734.0 million, including allocated goodwill to this unit of $309.1 million. On March 2, 2015, the Company sold the Respiratory Business to AstraZeneca plc (“AstraZeneca”) for consideration of $600.0 million upon closing, additional funds to be received for the sale of certain of our inventory to AstraZeneca and low single-digit royalties above a certain revenue threshold. AstraZeneca also paid Allergan an additional $100.0 million and Allergan has agreed to a number of contractual consents and approvals, including certain amendments to the ongoing collaboration agreements between AstraZeneca and Allergan (the “Respiratory Sale”). As a result of the final terms of the agreement, in the quarter ended March 31, 2015, the Company recognized an incremental charge in cost of sales (including the acquisition accounting fair value mark-up of inventory) relating to inventory that will not be sold to AstraZeneca of $35.3 million. The Company also recognized a gain on the sale of the business of $33.5 million, which is included within other (expense) income.
75
The following are the material transactions that were completed in the year ended December 31, 2014.
Durata Therapeutics
On November 17, 2014, the Company completed its tender offer to purchase all of the outstanding shares of Durata Therapeutics, Inc. (“Durata”), an innovative pharmaceutical company focused on the development and commercialization of novel therapeutics for patients with infectious diseases and acute illnesses (the “Durata Acquisition”). Allergan purchased all outstanding shares of Durata, which were valued at approximately $724.5 million, including the assumption of debt. Additionally, there is one contingent value right (“CVR”) per share, entitling the holder to receive additional cash payments of up to $5.00 per CVR if certain regulatory or commercial milestones related to Durata’s lead product Dalvance™ are achieved. The CVR had an acquisition date fair value of $49.0 million.
Contingent Consideration
At the time of the Durata Acquisition, additional consideration was conditionally due to the seller based upon the approval of DalvanceTM in Europe, the approval of a single dose indication and the product reaching certain sales milestones. The Company estimated the acquisition accounting fair value of the contingent consideration to be $49.0 million using a probability weighted approach that considered the possible outcomes based on assumptions related to the timing and probability of the product launch date, discount rates matched to the timing of the payment, and probability of success rates and discount adjustments on the related cash flows. On March 2, 2015, the Company announced that the European Commission had granted Allergan’s subsidiary Durata Therapeutics International B.V., marketing authorization for Xydalba™ (dalbavancin) for the treatment of acute bacterial skin and skin structure infections (ABSSSI) in adults. The approval triggered the first CVR payment in the quarter ended March 31, 2015 of $30.9 million. In January 2016, the Company received approval from the FDA for an expanded label that will include a single dose of Dalvance®, which triggered a second CVR payment of $30.9 million in the quarter ended March 31, 2016. The difference between the probability weighted fair value and the final payments are recorded as a component of cost of sales.
Forest Laboratories
On July 1, 2014, the Company acquired Forest Laboratories, Inc. (“Legacy Forest”) for $30.9 billion including outstanding indebtedness assumed of $3.3 billion, equity consideration of $20.6 billion, which includes outstanding equity awards, and cash consideration of $7.1 billion (the “Forest Acquisition”). Under the terms of the transaction, Legacy Forest shareholders received 89.8 million Allergan plc ordinary shares, 6.1 million Allergan plc non-qualified stock options and 1.1 million Allergan plc share units. Legacy Forest was a leading, fully integrated, specialty pharmaceutical company largely focused on the United States market. Legacy Forest marketed a portfolio of branded drug products and developed new medicines to treat patients suffering from diseases principally in the following therapeutic areas: central nervous system, cardiovascular, gastrointestinal, respiratory, anti-infective, and cystic fibrosis. A portion of the assets acquired are being divested as part of the Teva Transaction.
As a result of the Forest Acquisition, the Company incurred the following transaction and integration costs in the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, 2016 |
|
|
Three Months Ended March 31, 2015 |
|
||
Cost of sales |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Forest employees |
|
$ |
0.5 |
|
|
$ |
1.2 |
|
Acquisition, integration and restructuring related charges |
|
|
- |
|
|
|
1.0 |
|
Research and development |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Forest employees |
|
|
4.1 |
|
|
|
16.0 |
|
Acquisition, integration and restructuring related charges |
|
|
0.1 |
|
|
|
8.8 |
|
Selling and marketing |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Forest employees |
|
|
7.4 |
|
|
|
19.6 |
|
Acquisition, integration and restructuring related charges |
|
|
- |
|
|
|
16.8 |
|
General and administrative |
|
|
|
|
|
|
|
|
Stock-based compensation acquired for Forest employees |
|
|
8.1 |
|
|
|
21.1 |
|
Other integration charges |
|
|
- |
|
|
|
1.6 |
|
Acquisition, integration and restructuring related charges |
|
|
1.2 |
|
|
|
11.4 |
|
Total transaction and integration costs |
|
$ |
21.4 |
|
|
$ |
97.5 |
|
76
Operating results
Segments
In the third quarter of 2015, there was a strategic shift in the business as a result of the Teva Transaction. The Company currently manages its continuing operations in the following segments: US Brands, US Medical Aesthetics, International Brands and Anda Distribution. Beginning in the second quarter of 2016, the Company will have four reporting segments. The first segment, US Specialized Therapeutics includes the U.S. Eye Care, Medical Aesthetics, Medical Dermatology and Botox Therapeutic. The second segment is the U.S. General Medicine unit, which includes Central Nervous System (“CNS”), Gastrointestinal, Women’s Health and Anti-Infective therapeutic areas. The third segment is the Company’s International unit. The fourth segment is the Company’s distribution business, Anda Distribution. In addition, certain revenues and shared costs and the results of corporate initiatives are managed outside of the four segments. Prior period results have been recast to align to the current segment presentation.
The operating segments are organized as follows:
|
· |
The US Brands segment includes sales and expenses relating to branded products within the United States, including certain Botox® therapies. |
|
· |
The US Medical Aesthetics segment includes sales and expenses relating to aesthetics and dermatology products within the United States, including certain Botox® therapies. |
|
· |
The International Brands segment includes sales and expenses relating to products sold outside of the United States. |
|
· |
The Anda Distribution segment includes distribution of generic and branded pharmaceutical products manufactured by third parties, as well as by the Company, primarily to independent pharmacies, pharmacy chains, pharmacy buying groups and physicians’ offices. The Anda Distribution segment operating results exclude sales of products developed, acquired, or licensed by the US Brands, US Medical Aesthetics and International Brands segments. As the generics business is now reported within Discontinued Operations, the Anda Distribution segment includes revenues and expenses related to Company manufactured generics products sold through Anda. |
The Company evaluates segment performance based on segment contribution. Segment contribution for segments represents net revenues less cost of sales (defined below), selling and marketing expenses, and select general and administrative expenses. The Company does not evaluate the following items at the segment level:
|
· |
Revenues and operating expenses within cost of sales, selling and marketing expenses, and general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs. |
|
· |
General and administrative expenses that result from shared infrastructure, including certain expenses located within the United States. |
|
· |
Total assets including capital expenditures. |
|
· |
Other select revenues and operating expenses including R&D expenses, amortization, IPR&D impairments and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments. |
The Company defines segment net sales as product sales and other revenue derived from branded products or licensing agreements. In March 2015, as a result of the Allergan Acquisition, we began to promote Restasis®, Lumigan®/Ganfort®, Alphagan®/Combigan®, Botox®, fillers, other aesthetic products and other eye care products.
In the quarter ended March 31, 2016, the Company changed its measure of segment cost of sales. Cost of sales within segment contribution now includes standard production and packaging costs for the products we manufacture, third party acquisition costs for products manufactured by others, profit-sharing or royalty payments for products sold pursuant to licensing agreements and finished goods inventory reserve charges. Cost of sales included within segment contribution does not include non-standard production costs, such as non-finished goods inventory obsolescence charges, manufacturing variances and excess capacity utilization charges, where applicable. Cost of sales does not include amortization or impairment costs for acquired product rights or other acquired intangibles.
Selling and marketing expenses consist mainly of personnel-related costs, product promotion costs, distribution costs, professional service costs, insurance, depreciation and travel costs.
77
General and administrative expenses consist mainly of personnel-related costs, facilities costs, transaction costs, insurance, depreciation, litigation and settlement costs and professional services costs which are general in nature and attributable to the segment.
Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, 2016 |
|
|||||||||||||||||
|
|
US |
|
|
US Medical |
|
|
International |
|
|
Anda |
|
|
|
|
|
||||
|
|
Brands |
|
|
Aesthetics |
|
|
Brands |
|
|
Distribution |
|
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
2,302.7 |
|
|
$ |
449.7 |
|
|
$ |
673.3 |
|
|
$ |
364.7 |
|
|
$ |
3,790.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
259.4 |
|
|
|
30.9 |
|
|
|
99.2 |
|
|
|
302.9 |
|
|
|
692.4 |
|
Selling and marketing |
|
|
431.9 |
|
|
|
110.0 |
|
|
|
187.3 |
|
|
|
28.8 |
|
|
|
758.0 |
|
General and administrative |
|
|
68.1 |
|
|
|
13.3 |
|
|
|
27.6 |
|
|
|
10.2 |
|
|
|
119.2 |
|
Segment Contribution |
|
$ |
1,543.3 |
|
|
$ |
295.5 |
|
|
$ |
359.2 |
|
|
$ |
22.8 |
|
|
$ |
2,220.8 |
|
Contribution margin |
|
|
67.0 |
% |
|
|
65.7 |
% |
|
|
53.3 |
% |
|
|
6.3 |
% |
|
|
58.6 |
% |
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375.1 |
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
403.1 |
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,592.1 |
|
In-process research and development impairments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.0 |
|
Asset sales and impairments, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.7 |
) |
Operating (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(153.8 |
) |
Operating margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.1 |
)% |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results. |
|
|
Three Months Ended March 31, 2015 |
|
|||||||||||||||||
|
|
US |
|
|
US Medical |
|
|
International |
|
|
Anda |
|
|
|
|
|
||||
|
|
Brands |
|
|
Aesthetics |
|
|
Brands |
|
|
Distribution |
|
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
1,809.2 |
|
|
$ |
79.8 |
|
|
$ |
118.7 |
|
|
$ |
554.3 |
|
|
$ |
2,562.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
218.2 |
|
|
|
4.5 |
|
|
|
23.7 |
|
|
|
473.5 |
|
|
|
719.9 |
|
Selling and marketing |
|
|
372.3 |
|
|
|
13.8 |
|
|
|
42.3 |
|
|
|
37.6 |
|
|
|
466.0 |
|
General and administrative |
|
|
58.5 |
|
|
|
2.7 |
|
|
|
7.4 |
|
|
|
10.8 |
|
|
|
79.4 |
|
Segment Contribution |
|
$ |
1,160.2 |
|
|
$ |
58.8 |
|
|
$ |
45.3 |
|
|
$ |
32.4 |
|
|
$ |
1,296.7 |
|
Contribution margin |
|
|
64.1 |
% |
|
|
73.7 |
% |
|
|
38.2 |
% |
|
|
5.8 |
% |
|
|
50.6 |
% |
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
864.3 |
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
317.7 |
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
787.8 |
|
In-process research and development impairments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Asset sales and impairments, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6 |
|
Operating (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(677.7 |
) |
Operating margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26.5 |
)% |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results. |
78
The following is a reconciliation of net revenues for the operating segments to the Company’s net revenues for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Segment net revenues |
|
$ |
3,790.4 |
|
|
$ |
2,562.0 |
|
|
$ |
1,228.4 |
|
|
|
47.9 |
% |
Corporate revenues |
|
|
5.5 |
|
|
|
0.6 |
|
|
|
4.9 |
|
|
|
816.7 |
% |
Net revenues |
|
$ |
3,795.9 |
|
|
$ |
2,562.6 |
|
|
$ |
1,233.3 |
|
|
|
48.1 |
% |
No other country represents ten percent or more of net revenues outside of the United States. The US Brands, US Medical Aesthetics, and Anda Distribution segments are comprised solely of sales within the United States.
The following table represents global net revenues for the top products for the three months ended March 31, 2016 and 2015 ($ in millions):
|
Three Months Ended March 31, |
|
|||||||||||||||||||||||||||||||||||||||||||
|
Global |
|
U.S. |
|
International |
|
|||||||||||||||||||||||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
$ Change |
|
|
% Change |
|
2016 |
|
|
2015 |
|
|
$ Change |
|
|
% Change |
|
2016 |
|
|
2015 |
|
|
$ Change |
|
|
% Change |
|
||||||||||||
Botox® |
$ |
637.5 |
|
|
$ |
84.0 |
|
|
$ |
553.5 |
|
|
n.m. |
|
$ |
455.5 |
|
|
$ |
60.7 |
|
|
$ |
394.8 |
|
|
n.m. |
|
$ |
182.0 |
|
|
$ |
23.3 |
|
|
$ |
158.7 |
|
|
n.m. |
|
|||
Restasis® |
|
313.7 |
|
|
|
29.9 |
|
|
|
283.8 |
|
|
n.m. |
|
|
298.7 |
|
|
|
28.7 |
|
|
|
270.0 |
|
|
n.m. |
|
|
15.0 |
|
|
|
1.2 |
|
|
|
13.8 |
|
|
n.m. |
|
|||
Fillers |
|
214.7 |
|
|
|
24.6 |
|
|
|
190.1 |
|
|
n.m. |
|
|
114.1 |
|
|
|
12.8 |
|
|
|
101.3 |
|
|
n.m. |
|
|
100.6 |
|
|
|
11.8 |
|
|
|
88.8 |
|
|
n.m. |
|
|||
Namenda XR® |
|
173.1 |
|
|
|
150.6 |
|
|
|
22.5 |
|
|
|
14.9 |
% |
|
173.1 |
|
|
|
150.6 |
|
|
|
22.5 |
|
|
|
14.9 |
% |
|
- |
|
|
|
- |
|
|
|
- |
|
|
n.a. |
|
|
Lumigan®/Ganfort® |
|
169.6 |
|
|
|
21.2 |
|
|
|
148.4 |
|
|
n.m. |
|
|
81.5 |
|
|
|
8.1 |
|
|
|
73.4 |
|
|
n.m. |
|
|
88.1 |
|
|
|
13.1 |
|
|
|
75.0 |
|
|
n.m. |
|
|||
Bystolic® |
|
164.0 |
|
|
|
164.1 |
|
|
|
(0.1 |
) |
|
|
(0.1 |
)% |
|
163.6 |
|
|
|
163.7 |
|
|
|
(0.1 |
) |
|
|
(0.1 |
)% |
|
0.4 |
|
|
|
0.4 |
|
|
|
- |
|
|
|
0.0 |
% |
Linzess®/Constella® |
|
140.9 |
|
|
|
96.2 |
|
|
|
44.7 |
|
|
|
46.5 |
% |
|
137.1 |
|
|
|
95.5 |
|
|
|
41.6 |
|
|
|
43.6 |
% |
|
3.8 |
|
|
|
0.7 |
|
|
|
3.1 |
|
|
n.m. |
|
|
Alphagan®/Combigan® |
|
126.7 |
|
|
|
16.0 |
|
|
|
110.7 |
|
|
n.m. |
|
|
84.9 |
|
|
|
10.1 |
|
|
|
74.8 |
|
|
n.m. |
|
|
41.8 |
|
|
|
5.9 |
|
|
|
35.9 |
|
|
n.m. |
|
|||
Asacol®/Delzicol® |
|
121.2 |
|
|
|
149.2 |
|
|
|
(28.0 |
) |
|
|
(18.8 |
)% |
|
105.9 |
|
|
|
132.0 |
|
|
|
(26.1 |
) |
|
|
(19.8 |
)% |
|
15.3 |
|
|
|
17.2 |
|
|
|
(1.9 |
) |
|
|
(11.0 |
)% |
Lo Loestrin® |
|
89.3 |
|
|
|
83.3 |
|
|
|
6.0 |
|
|
|
7.2 |
% |
|
89.3 |
|
|
|
82.7 |
|
|
|
6.6 |
|
|
|
8.0 |
% |
|
- |
|
|
|
0.6 |
|
|
|
(0.6 |
) |
|
|
(100.0 |
)% |
Viibryd®/Fetzima® |
|
83.3 |
|
|
|
79.6 |
|
|
|
3.7 |
|
|
|
4.6 |
% |
|
83.3 |
|
|
|
79.6 |
|
|
|
3.7 |
|
|
|
4.6 |
% |
|
- |
|
|
|
- |
|
|
|
- |
|
|
n.a. |
|
|
Estrace® Cream |
|
80.7 |
|
|
|
71.9 |
|
|
|
8.8 |
|
|
|
12.2 |
% |
|
80.7 |
|
|
|
71.9 |
|
|
|
8.8 |
|
|
|
12.2 |
% |
|
- |
|
|
|
- |
|
|
|
- |
|
|
n.a. |
|
|
Minastrin® 24 |
|
80.4 |
|
|
|
65.4 |
|
|
|
15.0 |
|
|
|
22.9 |
% |
|
79.6 |
|
|
|
64.8 |
|
|
|
14.8 |
|
|
|
22.8 |
% |
|
0.8 |
|
|
|
0.6 |
|
|
|
0.2 |
|
|
|
33.3 |
% |
Silicone Implants |
|
67.4 |
|
|
|
9.4 |
|
|
|
58.0 |
|
|
n.m. |
|
|
33.9 |
|
|
|
2.4 |
|
|
|
31.5 |
|
|
n.m. |
|
|
33.5 |
|
|
|
7.0 |
|
|
|
26.5 |
|
|
n.m. |
|
|||
Carafate®/Sulcrate® |
|
61.5 |
|
|
|
53.6 |
|
|
|
7.9 |
|
|
|
14.7 |
% |
|
61.0 |
|
|
|
53.6 |
|
|
|
7.4 |
|
|
|
13.8 |
% |
|
0.5 |
|
|
|
- |
|
|
|
0.5 |
|
|
n.a. |
|
|
Ozurdex® |
|
60.5 |
|
|
|
7.0 |
|
|
|
53.5 |
|
|
n.m. |
|
|
19.4 |
|
|
|
2.7 |
|
|
|
16.7 |
|
|
n.m. |
|
|
41.1 |
|
|
|
4.3 |
|
|
|
36.8 |
|
|
n.m. |
|
|||
Aczone® |
|
33.0 |
|
|
|
6.0 |
|
|
|
27.0 |
|
|
n.m. |
|
|
33.0 |
|
|
|
6.0 |
|
|
|
27.0 |
|
|
n.m. |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
n.a. |
|
|||
Namenda® IR |
|
5.8 |
|
|
|
245.4 |
|
|
|
(239.6 |
) |
|
|
(97.6 |
)% |
|
5.8 |
|
|
|
245.4 |
|
|
|
(239.6 |
) |
|
|
(97.6 |
)% |
|
- |
|
|
|
- |
|
|
|
- |
|
|
n.a. |
|
|
Other Products Revenues |
|
807.9 |
|
|
|
650.9 |
|
|
|
157.0 |
|
|
|
24.1 |
% |
|
657.5 |
|
|
|
618.3 |
|
|
|
39.2 |
|
|
|
6.3 |
% |
|
150.4 |
|
|
|
32.6 |
|
|
|
117.8 |
|
|
n.m. |
|
|
Total Products Revenues |
|
3,431.2 |
|
|
|
2,008.3 |
|
|
|
1,422.9 |
|
|
|
70.9 |
% |
|
2,757.9 |
|
|
|
1,889.6 |
|
|
|
868.3 |
|
|
|
46.0 |
% |
|
673.3 |
|
|
|
118.7 |
|
|
|
554.6 |
|
|
|
467.2 |
% |
ANDA Revenues |
|
364.7 |
|
|
|
554.3 |
|
|
|
(189.6 |
) |
|
|
(34.2 |
)% |
|
364.7 |
|
|
|
554.3 |
|
|
|
(189.6 |
) |
|
|
(34.2 |
)% |
|
- |
|
|
|
- |
|
|
|
- |
|
|
n.a. |
|
|
Total Net Revenues |
$ |
3,795.9 |
|
|
$ |
2,562.6 |
|
|
$ |
1,233.3 |
|
|
|
48.1 |
% |
$ |
3,122.6 |
|
|
$ |
2,443.9 |
|
|
$ |
678.7 |
|
|
|
27.8 |
% |
$ |
673.3 |
|
|
$ |
118.7 |
|
|
$ |
554.6 |
|
|
|
467.2 |
% |
79
The following table presents net contribution for the US Brands segment for the three months ended March 31, 2016 and 2015 ($ in millions):
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Central Nervous System (CNS) |
$ |
554.3 |
|
|
$ |
548.4 |
|
|
$ |
5.9 |
|
|
|
1.1 |
% |
Eyecare |
|
533.0 |
|
|
|
94.7 |
|
|
|
438.3 |
|
|
n.m. |
|
|
Gastroenterology (GI) |
|
403.6 |
|
|
|
366.6 |
|
|
|
37.0 |
|
|
|
10.1 |
% |
Women's Health |
|
263.7 |
|
|
|
229.3 |
|
|
|
34.4 |
|
|
|
15.0 |
% |
Urology |
|
74.1 |
|
|
|
37.3 |
|
|
|
36.8 |
|
|
|
98.7 |
% |
Infectious Disease |
|
51.5 |
|
|
|
41.9 |
|
|
|
9.6 |
|
|
|
22.9 |
% |
Other(1) |
|
422.5 |
|
|
|
491.0 |
|
|
|
(68.5 |
) |
|
|
(14.0 |
)% |
Net revenues |
$ |
2,302.7 |
|
|
$ |
1,809.2 |
|
|
$ |
493.5 |
|
|
|
27.3 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(2) |
|
259.4 |
|
|
|
218.2 |
|
|
|
41.2 |
|
|
|
18.9 |
% |
Selling and marketing |
|
431.9 |
|
|
|
372.3 |
|
|
|
59.6 |
|
|
|
16.0 |
% |
General and administrative |
|
68.1 |
|
|
|
58.5 |
|
|
|
9.6 |
|
|
|
16.4 |
% |
Segment contribution |
$ |
1,543.3 |
|
|
$ |
1,160.2 |
|
|
$ |
383.1 |
|
|
|
33.0 |
% |
Segment margin |
|
67.0 |
% |
|
|
64.1 |
% |
|
|
|
|
|
|
2.9 |
% |
(1) |
The Company previously reported its cardiovascular franchise separately. The cardiovascular franchise is now being reported in Other. Sales of cardiovascular products were $163.6 million and $163.7 million in the three months ended March 31, 2016 and 2015, respectively. |
(2) |
Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results. |
Net Revenues
The increase in segment revenues is primarily due to the contribution from the Allergan Acquisition, which contributed a full quarter in 2016 as opposed to two weeks in 2015, growth in top products such as Namenda XR®, Linzess®, Estrace Cream, Minastrin® 24 and Lo Loestrin®, offset, in part, by a decline in Namenda IR® revenues of $239.6 million due to generic competition and a decline in Asacol®/Delzicol® revenues of $26.1 million as a result of volume declines.
Cost of Sales
The increase in cost of sales was primarily due to the contribution from the Allergan Acquisition, which contributed a full quarter in 2016 as opposed to two weeks in 2015.
Selling and Marketing Expenses
The increase in selling and marketing expenses relate to the contribution from the Allergan Acquisition, offset, in part, by cost savings due to corporate initiatives.
General and Administrative Expenses
The increase in general and administrative costs is primarily due to the Allergan Acquisition, offset in part, by the impact of corporate restructuring programs.
80
The following table presents net contribution for the US Medical Aesthetics segment for the three months ended March 31, 2016 and 2015 ($ in millions):
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Facial Aesthetics |
$ |
279.4 |
|
|
$ |
35.2 |
|
|
$ |
244.2 |
|
|
n.m. |
|
|
Medical Dermatology and Other |
|
122.2 |
|
|
|
30.5 |
|
|
|
91.7 |
|
|
n.m. |
|
|
Plastic Surgery |
|
48.1 |
|
|
|
14.1 |
|
|
|
34.0 |
|
|
n.m. |
|
|
Net revenues |
$ |
449.7 |
|
|
$ |
79.8 |
|
|
$ |
369.9 |
|
|
n.m. |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
30.9 |
|
|
|
4.5 |
|
|
|
26.4 |
|
|
n.m. |
|
|
Selling and marketing |
|
110.0 |
|
|
|
13.8 |
|
|
|
96.2 |
|
|
n.m. |
|
|
General and administrative |
|
13.3 |
|
|
|
2.7 |
|
|
|
10.6 |
|
|
n.m. |
|
|
Segment contribution |
$ |
295.5 |
|
|
$ |
58.8 |
|
|
$ |
236.7 |
|
|
n.m. |
|
|
Segment margin |
|
65.7 |
% |
|
|
73.7 |
% |
|
|
|
|
|
|
(8.0 |
)% |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results. |
The increase in segment revenues and operating expenses is primarily due to the contribution from the Allergan Acquisition, which contributed a full quarter in 2016 as opposed to two weeks of activity in 2015 and the Kythera Acquisition, which contributed a full quarter in 2016 as opposed to no activity in 2015.
International Brands Segment
The following table presents net contribution for the International Brands segment for the three months ended March 31, 2016 and 2015 ($ in millions):
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Eyecare |
$ |
291.5 |
|
|
$ |
40.5 |
|
|
$ |
251.0 |
|
|
n.m. |
|
|
Facial Aesthetics |
|
205.5 |
|
|
|
24.8 |
|
|
|
180.7 |
|
|
n.m. |
|
|
Other Therapeutics |
|
139.5 |
|
|
|
45.6 |
|
|
|
93.9 |
|
|
n.m. |
|
|
Plastic Surgery |
|
36.8 |
|
|
|
7.8 |
|
|
|
29.0 |
|
|
n.m. |
|
|
Net revenues |
$ |
673.3 |
|
|
$ |
118.7 |
|
|
$ |
554.6 |
|
|
n.m. |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
99.2 |
|
|
|
23.7 |
|
|
|
75.5 |
|
|
n.m. |
|
|
Selling and marketing |
|
187.3 |
|
|
|
42.3 |
|
|
|
145.0 |
|
|
n.m. |
|
|
General and administrative |
|
27.6 |
|
|
|
7.4 |
|
|
|
20.2 |
|
|
n.m. |
|
|
Segment contribution |
$ |
359.2 |
|
|
$ |
45.3 |
|
|
$ |
313.9 |
|
|
n.m. |
|
|
Segment margin |
|
53.3 |
% |
|
|
38.2 |
% |
|
|
|
|
|
|
15.1 |
% |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results. |
The increase in segment revenues and operating expenses is primarily due to the contribution from the Allergan Acquisition, which contributed a full quarter in 2016 as opposed to two weeks in 2015.
81
The following table presents net contribution for the Anda Distribution segment for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|
Change |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
Dollars |
|
% |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
364.7 |
|
|
$ |
554.3 |
|
|
$ |
(189.6 |
) |
|
(34.2 |
)% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
302.9 |
|
|
|
473.5 |
|
|
|
(170.6 |
) |
|
(36.0 |
)% |
Selling and marketing |
|
|
28.8 |
|
|
|
37.6 |
|
|
|
(8.8 |
) |
|
(23.4 |
)% |
General and administrative |
|
|
10.2 |
|
|
|
10.8 |
|
|
|
(0.6 |
) |
|
(5.6 |
)% |
Segment contribution |
|
$ |
22.8 |
|
|
$ |
32.4 |
|
|
$ |
(9.6 |
) |
|
(29.6 |
)% |
Segment margin |
|
|
6.3 |
% |
|
|
5.8 |
% |
|
|
|
|
|
0.5 |
% |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results. |
Net Revenues
The decrease in net revenues was primarily due to the loss of Target Corporation (“Target”) business due to CVS Health (“CVS”) acquiring Target’s in store pharmacies. The loss had the impact of lowering revenues by $145.4 million. Excluding the impact of Target, the Anda Distribution net revenue variance was primarily driven by generic price deflation. Anda Distribution segment results include the Company’s manufactured products sold through Anda that were previously included in our former Global Generics Segment.
Cost of Sales
Cost of sales includes a reduction of $134.0 million primarily due to the loss of Target business due to its agreement with CVS. Excluding the impact of Target, the Anda Distribution variance decrease in cost of sales was due to lower product sales. Cost of sales as a percentage of revenue decreased to 83.1% compared to 85.4% in the prior year period primarily due to product and customer mix.
Selling and Marketing Expenses
The decrease in selling and marketing expenses relates to lower freight costs due to a decrease in sales volume.
General and Administrative Expenses
General and administrative costs were consistent period over period.
82
Corporate represents the results of corporate initiatives as well as the impact of select revenues and shared costs. The following represents the corporate amounts for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, 2016 |
|
||||||||||||||||
|
|
Integration and Restructuring |
|
Fair Value Adjustments |
|
Effect of Purchase Accounting |
|
Other |
|
Revenues and Shared Costs |
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
5.5 |
|
$ |
5.5 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
4.6 |
|
|
7.8 |
|
|
45.2 |
|
|
- |
|
|
61.8 |
|
|
119.4 |
|
Selling and marketing |
|
|
13.5 |
|
|
- |
|
|
21.1 |
|
|
- |
|
|
3.2 |
|
|
37.8 |
|
General and administrative |
|
|
62.2 |
|
|
- |
|
|
12.3 |
|
|
18.3 |
|
|
130.6 |
|
|
223.4 |
|
Contribution |
|
$ |
(80.3 |
) |
$ |
(7.8 |
) |
$ |
(78.6 |
) |
$ |
(18.3 |
) |
$ |
(190.1 |
) |
$ |
(375.1 |
) |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights. |
|
|
Three Months Ended March 31, 2015 |
|
||||||||||||||||
|
|
Integration and Restructuring |
|
Fair Value Adjustments |
|
Effect of Purchase Accounting |
|
Other |
|
Revenues and Shared Costs |
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
0.6 |
|
$ |
0.6 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1) |
|
|
47.9 |
|
|
27.7 |
|
|
205.9 |
|
|
- |
|
|
18.7 |
|
|
300.2 |
|
Selling and marketing |
|
|
67.5 |
|
|
- |
|
|
36.1 |
|
|
- |
|
|
- |
|
|
103.6 |
|
General and administrative |
|
|
201.1 |
|
|
- |
|
|
196.4 |
|
|
- |
|
|
63.6 |
|
|
461.1 |
|
Contribution |
|
$ |
(316.5 |
) |
$ |
(27.7 |
) |
$ |
(438.4 |
) |
$ |
- |
|
$ |
(81.7 |
) |
$ |
(864.3 |
) |
(1) |
Excludes amortization and impairment of acquired intangibles including product rights. |
In the three months ended March 31, 2016, integration and restructuring charges primarily related to the integration of the Legacy Allergan business as well as charges incurred with the then pending merger with Pfizer, Inc. of $36.7 million. In the three months ended March 31, 2016, the Company incurred purchase accounting effects of $42.4 million in cost of sales primarily related to the fair value inventory step-up from the Allergan and Forest acquisitions as products were sold to the Company’s third party customers. The Company also incurred charges related to the purchase accounting impact on stock-based compensation related the Allergan and Forest acquisitions, which increased cost of sales, selling and marketing and general and administrative expenses. In addition, in the three months ended March 31, 2016, the Company incurred mark-to-market unrealized losses for foreign currency option contracts that are entered into to offset future exposure to movements in currencies. Shared costs primarily include above site and unallocated costs associated with running our global manufacturing facilities and corporate General & Administrative expenses. In the three months ended March 31, 2016, the increase in “Revenues and Shared Costs” versus the prior year period were primarily due to the Allergan Acquisition, which contributed a full quarter in 2016 as opposed to two weeks in 2015.
In the three months ended March 31, 2015, integration and restructuring charges primarily related to integration of the Allergan and Forest businesses. In the three months ended March 31, 2015, the Company incurred purchase accounting effects of $198.6 million in cost of sales primarily related to fair value inventory step-up from the Allergan and Forest acquisitions as products were sold to the Company’s third party customers. The Company also incurred charges related to the purchase accounting impact on stock-based compensation related the Allergan and Forest acquisitions, which increased cost of sales, selling and marketing and general and administrative expenses.
Research and Development Expenses
R&D expenses consist predominantly of personnel-related costs, active pharmaceutical ingredient costs, contract research, biostudy and facilities costs associated with product development.
83
R&D expenses consisted of the following components in the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Ongoing operating expenses |
|
$ |
276.5 |
|
|
$ |
171.7 |
|
|
$ |
104.8 |
|
|
|
61.0 |
% |
Brand related milestone payments and upfront license payments |
|
|
91.0 |
|
|
|
10.0 |
|
|
|
81.0 |
|
|
|
810.0 |
% |
Acquisition accounting fair market value adjustment to stock-based compensation |
|
|
13.6 |
|
|
|
66.3 |
|
|
|
(52.7 |
) |
|
|
(79.5 |
)% |
Acquisition, integration, and restructuring charges |
|
|
(3.9 |
) |
|
|
69.7 |
|
|
|
(73.6 |
) |
|
|
(105.6 |
)% |
Contingent consideration adjustments, net |
|
|
25.9 |
|
|
|
- |
|
|
|
25.9 |
|
|
n.a |
|
|
Total expenditures |
|
$ |
403.1 |
|
|
$ |
317.7 |
|
|
$ |
85.4 |
|
|
|
26.9 |
% |
The increase in ongoing R&D expenditures is primarily due to the impact of the Allergan Acquisition, which contributed a full quarter in 2016 as opposed to two weeks in 2015. Included within brand related milestone payments and upfront license payments in the three months ended March 31, 2016 is a net payment to Anterios of approximately $90.0 million.
Amortization
Amortization consisted of the following components in the three months ended March 31, 2016 and 2015:
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
($ in millions) |
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Amortization |
|
$ |
1,592.1 |
|
|
$ |
787.8 |
|
|
$ |
804.3 |
|
|
|
102.1 |
% |
Amortization for the three months ended March 31, 2016 increased as compared to the prior year period primarily as a result of increased amortization of $838.2 million of identifiable assets acquired in the Allergan Acquisition, which contributed a full quarter in 2016 as opposed to only two weeks in 2015.
IPR&D Impairments and Asset Sales and Impairments, Net
IPR&D Impairments and Asset Sales and Impairments, net consisted of the following components in the three months ended March 31, 2016 and 2015:
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
($ in millions) |
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
IPR&D impairments |
|
$ |
6.0 |
|
|
$ |
- |
|
|
$ |
6.0 |
|
|
n.a. |
|
|
Asset sales and impairments, net |
|
|
(1.7 |
) |
|
|
4.6 |
|
|
|
(6.3 |
) |
|
|
(137.0 |
)% |
IPR&D Impairments in the three months ended March 31, 2016 include a $6.0 million impairment related to a reduction in cash flows for Women’s Healthcare portfolio products.
Interest Income
Interest income consisted of the following components in the three months ended March 31, 2016 and 2015:
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
($ in millions) |
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Interest income |
|
$ |
3.1 |
|
|
$ |
1.8 |
|
|
$ |
1.3 |
|
|
|
72.2 |
% |
84
Interest expense consisted of the following components in the three months ended March 31, 2016 and 2015:
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
($ in millions) |
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Fixed Rate Notes |
|
$ |
286.5 |
|
|
$ |
139.5 |
|
|
|
147.0 |
|
|
|
105.4 |
% |
AGN Term Loan |
|
|
24.3 |
|
|
|
4.1 |
|
|
|
20.2 |
|
|
|
492.7 |
% |
ACT Term Loan |
|
|
11.1 |
|
|
|
14.4 |
|
|
|
(3.3 |
) |
|
|
(22.9 |
)% |
Floating Rate Notes |
|
|
5.9 |
|
|
|
1.3 |
|
|
|
4.6 |
|
|
|
353.8 |
% |
WC Term Loan |
|
|
3.7 |
|
|
|
6.5 |
|
|
|
(2.8 |
) |
|
|
(43.1 |
)% |
Revolving Credit Facility |
|
|
0.2 |
|
|
|
1.7 |
|
|
|
(1.5 |
) |
|
|
(88.2 |
)% |
Other |
|
|
1.1 |
|
|
|
4.4 |
|
|
|
(3.3 |
) |
|
|
(75.0 |
)% |
Interest expense |
|
$ |
332.8 |
|
|
$ |
171.9 |
|
|
$ |
160.9 |
|
|
|
93.6 |
% |
Interest expense increased to $332.8 million for the three months ended March 31, 2016 primarily due to interest from the indebtedness incurred as part of the Allergan Acquisition of $218.6 million compared to $48.3 million in the three months ended March 31, 2015.
Other (expense) income, net
Other (expense) income, net consisted of the following components in the three months ended March 31, 2016 and 2015:
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
($ in millions) |
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
Bridge loan commitment fee |
|
$ |
- |
|
|
$ |
(263.0 |
) |
|
$ |
263.0 |
|
|
|
(100.0 |
)% |
Interest rate lock |
|
|
- |
|
|
|
31.0 |
|
|
|
(31.0 |
) |
|
|
(100.0 |
)% |
Other (expense) income |
|
|
0.5 |
|
|
|
34.1 |
|
|
|
(33.6 |
) |
|
|
(98.5 |
)% |
Other (expense) income, net |
|
$ |
0.5 |
|
|
$ |
(197.9 |
) |
|
$ |
198.4 |
|
|
|
|
|
Bridge Loan Commitment Fee
During the three months ended March 31, 2015, the Company incurred costs associated with bridge loan commitments in connection with the Allergan Acquisition of $263.0 million.
Interest rate lock
During the three months ended March 31, 2015, the Company entered into interest rate locks on a portion of the $21.0 billion of debt issued as part of the Allergan Acquisition. As a result of the interest rate locks, the Company recorded income of $31.0 million.
Other Income
In the three months ended March 31, 2015, we recorded a gain on the sale of the Respiratory Business of $33.5 million.
(Benefit) for Income Taxes
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
($ in millions) |
|
2016 |
|
|
2015 |
|
|
Dollars |
|
|
% |
|
||||
(Benefit) for income taxes |
|
$ |
(402.0 |
) |
|
$ |
(259.0 |
) |
|
$ |
(143.0 |
) |
|
|
55.2 |
% |
Effective tax rate |
|
|
83.2 |
% |
|
|
24.8 |
% |
|
|
|
|
|
|
|
|
The Company’s effective tax rate for the three months ended March 31, 2016 was 83.2% compared to 24.8% for the three months ended March 31, 2015. The effective tax rate for the three months ended March 31, 2016 was impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate and U.S. losses tax benefited at rates greater than the Irish statutory rate. Additionally, the tax benefit for the three months ended March 31, 2016 included an expense of $124.3 million for the change in a valuation allowance on a portion of U.S. capital loss carryforwards resulting from restructuring associated with the sale of the global
85
generics business and a benefit of $32.2 million for the recognition of previously unrecognized tax benefits. The effective tax rate for the three months ended March 31, 2015 was impacted by income earned in low tax jurisdictions and U.S. losses tax benefited at rates greater than the Irish statutory rate. The increase in the effective tax rate for the period ended March 31, 2016 as compared to the period ended March 31, 2015 is the result of changes in the mix of income and losses in jurisdictions with rates other than the Irish statutory rate.
On April 4, 2016, the Treasury Department released temporary and proposed regulations on corporate inversions that addressed multiple acquisitions of U.S. corporations as well as implemented two prior anti-inversion notices. We believe that, under current law and inclusive of these new regulations, Allergan plc, the ultimate parent of the Company, remains treated as a foreign corporation for U.S. federal tax purposes because it is an Irish incorporated entity.
Discontinued Operations
On July 27, 2015, the Company announced that it entered into the Teva Transaction. Under the Teva Agreement, Teva will acquire Allergan's global generics business, including the U.S. and international generic commercial units, our third-party supplier Medis, our global generic manufacturing operations, our global generic R&D unit, our international OTC commercial unit (excluding OTC eye care products) and some established international brands.
Allergan will retain its global branded pharmaceutical and medical aesthetics businesses, as well as its biosimilars development programs, certain OTC products, and the Anda Distribution business. The Company will also have continuing involvement with Teva after the close of the transaction. As a result of the Teva Transaction, the Company will hold equity in Teva, continue to distribute products divested to Teva through our Anda Distribution segment as well as purchase product manufactured by Teva for sale in our US Brands segment as part of ongoing transitional service and contract manufacturing agreements.
Financial results of the global generics business are presented as "Income from discontinued operations" on the Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015; and assets and liabilities of the global generics business to be disposed of are presented as "Current assets held for sale", "Non current assets held for sale", “Current liabilities held for sale” and “Long term liabilities held for sale” on the Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015.
The following table presents key financial results of the global generics business included in "Income from discontinued operations" for the three months ended March 31, 2016 and 2015 ($ in millions):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Third party revenues |
|
$ |
1,255.3 |
|
|
$ |
1,671.6 |
|
Related party sales |
|
|
41.3 |
|
|
|
69.5 |
|
Net revenues |
|
|
1,296.6 |
|
|
|
1,741.1 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights) |
|
|
693.2 |
|
|
|
762.8 |
|
Research and development |
|
|
112.3 |
|
|
|
113.3 |
|
Selling and marketing |
|
|
112.0 |
|
|
|
165.9 |
|
General and administrative |
|
|
128.4 |
|
|
|
152.5 |
|
Amortization |
|
|
- |
|
|
|
137.6 |
|
In-process research and development impairments, asset sales and impairments, net |
|
|
- |
|
|
|
53.2 |
|
Total operating expenses |
|
|
1,045.9 |
|
|
|
1,385.3 |
|
Operating income |
|
|
250.7 |
|
|
|
355.8 |
|
Other (expense) income, net |
|
|
- |
|
|
|
(0.1 |
) |
(Benefit) / provision for income taxes |
|
|
(86.7 |
) |
|
|
81.3 |
|
Net income from discontinued operations |
|
$ |
337.4 |
|
|
$ |
274.4 |
|
Related party revenues represent the sale of product to the Company’s Anda Distribution segment.
The decrease in net revenues in the three months ended March 31, 2016 versus the three months ended March 31, 2015 is primarily due to lower sales of key products in the United States including generic versions of Guanfacine, Oxycontin as well as our Lidocaine Patch and oral contraceptives, offset partially by higher sales outside of the United States, including the impact of the Auden Mckenzie Acquisition completed in May 2015. The decrease in cost of sales is due to the decrease in net revenues. The
86
decrease in selling and marketing and general and administrative expenses is primarily due to lower spending across International Generics, due in part to fewer sales force and administrative personnel resulting from the impact of corporate initiatives.
Liquidity and Capital Resources
Working Capital Position
Working capital at March 31, 2016 and December 31, 2015 is summarized as follows:
|
March 31, |
|
|
December 31, |
|
|
Increase |
|
|||
($ in millions): |
2016 |
|
|
2015 |
|
|
(Decrease) |
|
|||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
2,260.8 |
|
|
$ |
1,096.0 |
|
|
$ |
1,164.8 |
|
Marketable securities |
|
13.0 |
|
|
|
9.3 |
|
|
|
3.7 |
|
Accounts receivable, net |
|
2,652.8 |
|
|
|
2,401.6 |
|
|
|
251.2 |
|
Inventories |
|
1,022.2 |
|
|
|
1,009.7 |
|
|
|
12.5 |
|
Prepaid expenses and other current assets |
|
634.3 |
|
|
|
522.2 |
|
|
|
112.1 |
|
Current assets held for sale |
|
3,508.4 |
|
|
|
3,540.3 |
|
|
|
(31.9 |
) |
Total current assets |
|
10,091.5 |
|
|
|
8,579.1 |
|
|
|
1,512.4 |
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
$ |
4,701.1 |
|
|
$ |
4,349.5 |
|
|
$ |
351.6 |
|
Income taxes payable |
|
68.5 |
|
|
|
54.2 |
|
|
|
14.3 |
|
Current portion of long-term debt and capital leases |
|
4,015.7 |
|
|
|
2,396.5 |
|
|
|
1,619.2 |
|
Current liabilities held for sale |
|
1,410.2 |
|
|
|
1,491.8 |
|
|
|
(81.6 |
) |
Total current liabilities |
|
10,195.5 |
|
|
|
8,292.0 |
|
|
|
1,903.5 |
|
Working Capital |
$ |
(104.0 |
) |
|
$ |
287.1 |
|
|
$ |
(391.1 |
) |
Working Capital excluding assets held for sale, net |
$ |
(2,202.2 |
) |
|
$ |
(1,761.4 |
) |
|
$ |
(440.8 |
) |
Current Ratio, excluding net assets held for sale |
|
0.75 |
|
|
|
0.74 |
|
|
|
|
|
Working capital excluding assets held for sale, net, decreased $440.8 million to $(2,202.2) million at March 31, 2016 compared to $(1,761.4) million at December 31, 2015. The decrease in working capital is due to an increase in the current portion of outstanding indebtedness of $719.2 million (excluding the $900.0 million of revolver borrowings which increased cash and cash equivalents by an equal amount), offset, in part, by a reduction in accrued interest of $114.3 million.
Cash Flows from Operations
Summarized cash flow from operations is as follows:
|
|
Three Months Ended March 31, |
|
|||||
($ in millions) |
|
2016 |
|
|
2015 |
|
||
Net cash provided by operating activities |
|
$ |
1,218.5 |
|
|
$ |
525.0 |
|
Cash flows from operations represent net income / (loss) adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities increased $693.5 million in the three months ended March 31, 2016 versus the prior year period, due primarily to an increase in net income, adjusted for non-cash activity of $629.2 million ($1,576.2 million and $947.0 million of net income / (loss), adjusted for non-cash activities in the three months ended March 31, 2016 and 2015, respectively), as well as a lower net increase in working capital versus the prior year period.
Management expects that available cash balances and the remaining 2016 cash flows from operating activities will provide sufficient resources to fund our operating liquidity needs and expected 2016 capital expenditure funding requirements.
87
Our cash flows from investing activities are summarized as follows:
|
|
Three Months Ended March 31, |
|
|||||
($ in millions) |
|
2016 |
|
|
2015 |
|
||
Net cash (used in) investing activities |
|
$ |
(53.8 |
) |
|
$ |
(33,940.9 |
) |
Investing cash flows consist primarily of cash used in acquisitions of businesses and intangibles (primarily product rights), capital expenditures and purchases of investments and marketable securities partially offset by proceeds from the sale of investments and marketable securities. Included in the three months ended March 31, 2016 was cash used for capital expenditures of $84.9 million, offset, in part, by proceeds of sales investments and other assets and property, plant and equipment.
Included in the quarter ended March 31, 2015 was cash used in connection with the Allergan Acquisition, net of cash acquired, of $34,646.2 million and capital expenditures for property, plant and equipment of $136.6 million, offset, in part by cash received from the sale of assets, primarily the Respiratory Business, of $790.5 million.
Financing Cash Flows
Our cash flows from financing activities are summarized as follows:
|
|
Three Months Ended March 31, |
|
|||||
($ in millions) |
|
2016 |
|
|
2015 |
|
||
Net cash (used in) / provided by financing activities |
|
$ |
(5.1 |
) |
|
$ |
35,285.6 |
|
Financing cash flows consist primarily of borrowings and repayments of debt, repurchases of ordinary shares and proceeds from the exercise of stock options. Cash used in financing activities in the three months ended March 31, 2016 included payments of debt of $854.2 million, contingent consideration of $32.3 million and dividends of $69.6 million, offset by borrowings under the credit facility of $900.0 million.
Included in the three months ended March 31, 2015 was the issuance of indebtedness of $29,265.6 million, the issuance of ordinary shares of $4,071.1 million and the issuance of Mandatory Convertible Preferred Shares of $4,929.7 million in connection with the Allergan Acquisition, offset in part by payments of debt of $2,660.0 million and debt issuance costs of $310.8 million.
88
Total debt and capital leases consisted of the following ($ in millions):
|
|
Balance As of |
|
|
Fair Market Value As of |
|
||||||||||
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
|
March 31, 2016 |
|
|
December 31, 2015 |
|
||||
Senior Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating Rate Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$500.0 million floating rate notes due September 1, 2016 |
|
$ |
500.0 |
|
|
$ |
500.0 |
|
|
$ |
500.7 |
|
|
$ |
500.5 |
|
$500.0 million floating rate notes due March 12, 2018 |
|
|
500.0 |
|
|
|
500.0 |
|
|
|
502.8 |
|
|
|
499.6 |
|
$500.0 million floating rate notes due March 12, 2020 |
|
|
500.0 |
|
|
|
500.0 |
|
|
|
497.5 |
|
|
|
496.2 |
|
|
|
|
1,500.0 |
|
|
|
1,500.0 |
|
|
|
1,501.0 |
|
|
|
1,496.3 |
|
Fixed Rate Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$800.0 million 5.750% notes due April 1, 2016 |
|
|
800.0 |
|
|
|
800.0 |
|
|
|
800.0 |
|
|
|
808.4 |
|
$1,000.0 million 1.850% notes due March 1, 2017 |
|
|
1,000.0 |
|
|
|
1,000.0 |
|
|
|
1,004.5 |
|
|
|
1,001.5 |
|
$500.0 million 1.300% notes due June 15, 2017 |
|
|
500.0 |
|
|
|
500.0 |
|
|
|
498.6 |
|
|
|
496.3 |
|
$1,200.0 million 1.875% notes due October 1, 2017 |
|
|
1,200.0 |
|
|
|
1,200.0 |
|
|
|
1,205.4 |
|
|
|
1,196.0 |
|
$3,000.0 million 2.350% notes due March 12, 2018 |
|
|
3,000.0 |
|
|
|
3,000.0 |
|
|
|
3,035.9 |
|
|
|
3,004.6 |
|
$250.0 million 1.350% notes due March 15, 2018 |
|
|
250.0 |
|
|
|
250.0 |
|
|
|
248.2 |
|
|
|
244.9 |
|
$1,050.0 million 4.375% notes due February 1, 2019 |
|
|
1,050.0 |
|
|
|
1,050.0 |
|
|
|
1,113.9 |
|
|
|
1,099.5 |
|
$500.0 million 2.450% notes due June 15, 2019 |
|
|
500.0 |
|
|
|
500.0 |
|
|
|
506.9 |
|
|
|
494.4 |
|
$400.0 million 6.125% notes due August 14, 2019 |
|
|
400.0 |
|
|
|
400.0 |
|
|
|
450.7 |
|
|
|
444.2 |
|
$3,500.0 million 3.000% notes due March 12, 2020 |
|
|
3,500.0 |
|
|
|
3,500.0 |
|
|
|
3,584.7 |
|
|
|
3,505.1 |
|
$650.0 million 3.375% notes due September 15, 2020 |
|
|
650.0 |
|
|
|
650.0 |
|
|
|
675.5 |
|
|
|
656.6 |
|
$750.0 million 4.875% notes due February 15, 2021 |
|
|
750.0 |
|
|
|
750.0 |
|
|
|
827.9 |
|
|
|
807.4 |
|
$1,200.0 million 5.000% notes due December 15, 2021 |
|
|
1,200.0 |
|
|
|
1,200.0 |
|
|
|
1,333.3 |
|
|
|
1,299.4 |
|
$3,000.0 million 3.450% notes due March 15, 2022 |
|
|
3,000.0 |
|
|
|
3,000.0 |
|
|
|
3,105.0 |
|
|
|
3,006.8 |
|
$1,700.0 million 3.250% notes due October 1, 2022 |
|
|
1,700.0 |
|
|
|
1,700.0 |
|
|
|
1,739.6 |
|
|
|
1,669.6 |
|
$350.0 million 2.800% notes due March 15, 2023 |
|
|
350.0 |
|
|
|
350.0 |
|
|
|
345.7 |
|
|
|
327.7 |
|
$1,200.0 million 3.850% notes due June 15, 2024 |
|
|
1,200.0 |
|
|
|
1,200.0 |
|
|
|
1,254.5 |
|
|
|
1,202.6 |
|
$4,000.0 million 3.800% notes due March 15, 2025 |
|
|
4,000.0 |
|
|
|
4,000.0 |
|
|
|
4,166.0 |
|
|
|
3,984.6 |
|
$2,500.0 million 4.550% notes due March 15, 2035 |
|
|
2,500.0 |
|
|
|
2,500.0 |
|
|
|
2,585.2 |
|
|
|
2,462.2 |
|
$1,000.0 million 4.625% notes due October 1, 2042 |
|
|
1,000.0 |
|
|
|
1,000.0 |
|
|
|
1,031.3 |
|
|
|
956.1 |
|
$1,500.0 million 4.850% notes due June 15, 2044 |
|
|
1,500.0 |
|
|
|
1,500.0 |
|
|
|
1,602.1 |
|
|
|
1,483.6 |
|
$2,500.0 million 4.750% notes due March 15, 2045 |
|
|
2,500.0 |
|
|
|
2,500.0 |
|
|
|
2,648.7 |
|
|
|
2,452.7 |
|
|
|
|
32,550.0 |
|
|
|
32,550.0 |
|
|
|
33,763.6 |
|
|
|
32,604.2 |
|
Total Senior Notes Gross |
|
|
34,050.0 |
|
|
|
34,050.0 |
|
|
|
35,264.6 |
|
|
|
34,100.5 |
|
Unamortized premium |
|
|
205.1 |
|
|
|
225.9 |
|
|
|
- |
|
|
|
- |
|
Unamortized discount |
|
|
(104.6 |
) |
|
|
(107.4 |
) |
|
|
- |
|
|
|
- |
|
Total Senior Notes Net |
|
|
34,150.5 |
|
|
|
34,168.5 |
|
|
|
35,264.6 |
|
|
|
34,100.5 |
|
Term Loan Indebtedness: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WC Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WC Three Year Tranche variable rate debt maturing October 1, 2016 |
|
|
191.5 |
|
|
|
191.5 |
|
|
|
|
|
|
|
|
|
WC Five Year Tranche variable rate debt maturing October 1, 2018** |
|
|
181.1 |
|
|
|
498.8 |
|
|
|
|
|
|
|
|
|
|
|
|
372.6 |
|
|
|
690.3 |
|
|
|
|
|
|
|
|
|
ACT Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Term Loan variable rate debt maturing October 31, 2017** |
|
|
358.8 |
|
|
|
572.1 |
|
|
|
|
|
|
|
|
|
2019 Term Loan variable rate debt maturing July 1, 2019** |
|
|
1,650.0 |
|
|
|
1,700.0 |
|
|
|
|
|
|
|
|
|
|
|
|
2,008.8 |
|
|
|
2,272.1 |
|
|
|
|
|
|
|
|
|
AGN Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AGN Three Year Tranche variable rate debt maturing March 17, 2018 |
|
|
2,750.0 |
|
|
|
2,750.0 |
|
|
|
|
|
|
|
|
|
AGN Five Year Tranche variable rate debt maturing March 17, 2020** |
|
|
2,475.0 |
|
|
|
2,543.8 |
|
|
|
|
|
|
|
|
|
|
|
|
5,225.0 |
|
|
|
5,293.8 |
|
|
|
|
|
|
|
|
|
Total Term Loan Indebtedness |
|
|
7,606.4 |
|
|
|
8,256.2 |
|
|
|
|
|
|
|
|
|
Other Indebtedness |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolver Borrowings |
|
|
900.0 |
|
|
|
200.0 |
|
|
|
|
|
|
|
|
|
Debt Issuance Costs |
|
|
(185.6 |
) |
|
|
(195.8 |
) |
|
|
|
|
|
|
|
|
Other |
|
|
93.0 |
|
|
|
97.4 |
|
|
|
|
|
|
|
|
|
Total Other Borrowings |
|
|
807.4 |
|
|
|
101.6 |
|
|
|
|
|
|
|
|
|
Capital Leases |
|
|
3.2 |
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
Total Indebtedness |
|
$ |
42,567.5 |
|
|
$ |
42,530.4 |
|
|
|
|
|
|
|
|
|
** |
The indebtedness requires a quarterly repayment of 2.5%. |
89
Fair market value in the table above is determined in accordance with ASC Topic 820 “Fair Value Measurement” (“ASC 820”) under Level 2 based upon quoted prices for similar items in active markets. The book value of the outstanding term loan indebtedness approximates fair value as the debt is at variable interest rates and re-prices frequently.
Unless otherwise indicated, the remaining loan balances after the quarterly required payments are due upon maturity.
Floating Rate Notes
On March 4, 2015, Actavis Funding SCS, a limited partnership (société en commandite simple) organized under the laws of the Grand Duchy of Luxembourg and an indirect wholly-owned subsidiary of Allergan plc, issued floating rate notes due 2016 (the “2016 Floating Rate Notes”), floating rate notes due 2018 (the “2018 Floating Rate Notes”), floating rate notes due 2020 (the “2020 Floating Rate Notes”), 1.850% notes due 2017 (the “1.850% 2017 Notes”), 2.350% notes due 2018 (the “2.350% 2018 Notes”), 3.000% notes due 2020 (the “3.000% 2020 Notes”), 3.450% notes due 2022 (the “3.450% 2022 Notes”), 3.800% notes due 2025 (the “3.800% 2025 Notes”), 4.550% notes due 2035 (the “4.550% 2035 Notes”) and 4.750% notes due 2045 (the “4.750% 2045 Notes”). The notes are fully and unconditionally guaranteed by Actavis Funding SCS’s indirect parents, Warner Chilcott Limited and Actavis Capital S.a.r.l. (“Actavis Capital”), and by Actavis, Inc., a subsidiary of Actavis Capital, on an unsecured and unsubordinated basis. Allergan plc has not guaranteed the notes.
The 2016 Floating Rate Notes, the 2018 Floating Rate Notes and the 2020 Floating Rate Notes bear interest at a floating rate equal to three-month LIBOR plus 0.875%, 1.080% and 1.255% per annum, respectively. Interest on the 2016 Floating Rate Notes is payable quarterly on March 1, June 1, September 1 and December 1 of each year, and began on June 1, 2015. Interest on the 2018 Floating Rate Notes and the 2020 Floating Rate Notes is payable quarterly on March 12, June 12, September 12 and December 12 of each year, and began on June 12, 2015.
Fixed Rate Notes
The Company has issued fixed rate notes over multiple issuances for various business needs. Interest on the various notes is generally payable semi-annually with various payment dates.
Acquired Allergan Notes
On March 17, 2015 in connection with the Allergan Acquisition, the Company acquired, and subsequently guaranteed, along with Warner Chilcott Limited, the indebtedness of Allergan, Inc. comprised of the $350.0 million 2.800% senior notes due 2023, the $650.0 million 3.375% senior notes due 2020, the $250.0 million 1.350% senior notes due 2018 and the $800.0 million 5.750% senior notes due 2016. Interest payments are due on the $350.0 million senior notes semi-annually on the principal amount of the notes at a rate of 2.80% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption, if the redemption occurs prior to December 15, 2022 (three months prior to the maturity of the 2023 senior notes). If the redemption occurs on or after December 15, 2022, then such redemption is not subject to the make-whole provision. Interest payments are due on the $650.0 million senior notes semi-annually on the principal amount of the notes at a rate of 3.375% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. Interest payments are due on the $250.0 million senior notes semi-annually on the principal amount of the notes at a rate of 1.350% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. Interest payments are due on the $800.0 million senior notes semi-annually on the principal amount of the notes at a rate of 5.750% per annum, and were redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. The fair value of the acquired senior notes was determined to be $2,087.5 million as of March 17, 2015. As such, as part of acquisition accounting, the company recorded a premium of $37.5 million to be amortized as contra interest over the life of the notes.
The $800.0 million 5.750% senior notes were paid in full on April 1, 2016 with proceeds from the $900.0 million of borrowings under the revolving credit facility.
Credit Facility Indebtedness
WC Term Loan
On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a second amendment agreement (the “WC Term Loan Amendment”) among Allergan plc, Warner Chilcott Limited, Warner Chilcott Finance, LLC, Actavis WC 2 S.à r.l. (“Actavis WC 2”), Warner Chilcott Company, LLC (“WCCL”), Warner Chilcott Corporation (“WC Corporation” and together with Actavis WC
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2 and WCCL, the “WC Borrowers”), Bank of America, N.A. (“BofA”), as administrative agent, and the lenders party thereto. The WC Term Loan Amendment amends and restates Allergan plc’s existing amended and restated WC term loan credit and guaranty agreement, dated as of June 9, 2014 (such agreement, prior to its amendment and restatement pursuant to the WC Term Loan Amendment, the “2014 WC Term Loan”), among the WC Borrowers, Allergan plc, Warner Chilcott Limited, Warner Chilcott Finance, LLC, the lenders from time to time party thereto and BofA, as administrative agent, which amended and restated Allergan plc’s existing WC term loan credit and guaranty agreement, dated as of August 1, 2013 (such agreement, prior to its amendment and restatement pursuant to the 2014 WC Term Loan Amendment, the “Existing WC Term Loan”) among the WC Borrowers, Warner Chilcott Finance, LLC, Actavis Limited, BofA, as administrative agent and a syndicate of banks participating as lenders.
Pursuant to the Existing WC Term Loan, on October 1, 2013 (the “WC Closing Date”), the lenders party thereto provided term loans in a total aggregate principal amount of $2.0 billion, comprised of (i) a $1.0 billion tranche that will mature on October 1, 2016 (the “WC Three Year Tranche”) and (ii) a $1.0 billion tranche that will mature on October 1, 2018 (the “WC Five Year Tranche”). The proceeds of borrowings under the Existing WC Term Loan Agreement, together with $41.0 million of cash on hand, were used to finance the repayment in full of all amounts outstanding under Warner Chilcott’s then-existing Credit Agreement, dated as of March 17, 2011, as amended by Amendment No. 1 on August 20, 2012, among the WC Borrowers, Warner Chilcott Holdings Company III, Limited, BofA, as administrative agent and a syndicate of banks participating as lenders. In the three months ended March 31, 2016, the Company prepaid $311.7 million of WC Term Loan indebtedness.
Borrowings under the WC Term Loan Agreement bear interest at the applicable borrower’s choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from (x) 0.00% per annum to 0.75% per annum under the WC Three Year Tranche and (y) 0.125% per annum to 0.875% per annum under the WC Five Year Tranche, depending on the publicly announced debt ratings for non-credit-enhanced, senior unsecured long-term indebtedness of Allergan plc (such applicable debt rating the “Debt Rating”) or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 1.75% per annum under the WC Three Year Tranche and (y) 1.125% per annum to 1.875% per annum under the WC Five Year Tranche, depending on the Debt Rating. The outstanding principal amount of loans under the WC Three Year Tranche is not subject to quarterly amortization and shall be payable in full on the three year anniversary of the WC Closing Date. The outstanding principal amount of loans under the WC Five Year Tranche is payable in equal quarterly amounts of 2.50% per quarter prior to the fifth anniversary of the WC Closing Date, with the remaining balance payable on the fifth year anniversary of the WC Closing Date.
The Company is subject to, and, at March 31, 2016, was in compliance with, all financial and operational covenants under the terms of the WC Term Loan.
ACT Term Loan
On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a third amendment agreement (the “ACT Term Loan Amendment”) among Allergan plc, Warner Chilcott Limited, Actavis Capital, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent, and the lenders party thereto. The ACT Term Loan Amendment amends and restates Allergan plc’s existing second amended and restated Allergan term loan credit and guaranty agreement, dated as of March 31, 2014 (such agreement, prior to its amendment and restatement pursuant to the ACT Term Loan Amendment, the “2014 ACT Term Loan Agreement” and together with the Existing ACT Term Loan Agreement (defined below), the “ACT Term Loan”) among Actavis Capital, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent, and the lenders from time to time party thereto, which amended and restated Allergan plc’s existing amended and restated Allergan term loan credit and guaranty agreement, dated as of October 1, 2013 (such agreement, prior to its amendment and restatement pursuant to the ACT Term Loan Amendment, the “Existing ACT Term Loan Agreement”) among Actavis Capital, Allergan plc, Actavis, Inc., BofA, as administrative agent, and the lenders from time to time party thereto.
The Existing ACT Term Loan Agreement amended and restated Actavis, Inc.’s $1,800.0 million senior unsecured term loan credit facility, dated as of June 22, 2012. At the closing of the Existing ACT Term Loan Agreement, an aggregate principal amount of $1,572.5 million was outstanding (the “2017 Term Loan”). The 2017 Term Loan matures on October 31, 2017. The outstanding principal amount of the 2017 term loan is payable in equal quarterly installments of 2.50% per quarter, with the remaining balance payable on the maturity date. In the three months ended March 31, 2016, the Company prepaid $200.0 million of ACT Term Loan indebtedness.
On March 31, 2014, Allergan plc, Actavis Capital, Actavis, Inc., BofA, as Administrative Agent, and a syndicate of banks participating as lenders entered into the 2014 ACT Term Loan Agreement to amend and restate the Existing ACT Term Loan Agreement. On July 1, 2014, in connection with the Forest Acquisition, the Company borrowed $2.0 billion of term loan indebtedness under tranche A-2 of the 2014 ACT Term Loan Agreement, which is due July 1, 2019 (the “2019 Term Loan”). The outstanding principal amount of the 2019 term loan is payable in equal quarterly installments of 2.50% per quarter, with the remaining balance payable on the maturity date.
91
The ACT Term Loan provides that loans thereunder will bear interest, at the Company’s choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from (x) 0.00% per annum to 1.00% per annum with respect to the 2017 term-loan and (y) 0.125% per annum to 0.875% per annum with respect to the 2019 term-loan, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 2.00% per annum with respect to the 2017 term-loan and (y) 1.125% per annum to 1.875% per annum with respect to the 2019 term-loan, depending on the Debt Rating.
The Company is subject to, and at March 31, 2016 was in compliance with, all financial and operational covenants under the terms of the ACT Term Loan.
AGN Term Loan
On December 17, 2014, Allergan, Inc. and certain of its subsidiaries entered into a senior unsecured term loan credit agreement (the “AGN Term Loan”), among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Term Lenders”), JPMorgan Chase Bank, N.A. (“JPMCB”), as administrative agent and the other financial institutions party thereto. Under the AGN Term Loan, the Term Lenders provided (i) a $2.75 billion tranche maturing on March 17, 2018 (the “AGN Three Year Tranche”) and (ii) a $2.75 billion tranche and maturing on March 17, 2020 (the “AGN Five Year Tranche”). The proceeds of borrowings under the AGN Term Loan were to be used to finance, in part, the cash component of the Allergan Acquisition consideration and certain fees and expenses incurred in connection with the Allergan Acquisition.
Borrowings under the AGN Term Loan bear interest at our choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from (x) 0.00% per annum to 1.00% per annum under the AGN Three Year Tranche and (y) 0.125% per annum to 1.250%% per annum under the AGN Five Year Tranche, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 2.00% per annum under the AGN Three Year Tranche and (y) 1.125% per annum to 2.250% per annum under the AGN Five Year Tranche, depending on the Debt Rating. The outstanding principal amount of loans under the AGN Three Year Tranche is not subject to quarterly amortization and shall be payable in full on the maturity date. The outstanding principal amount of loans under the AGN Five Year Tranche is payable in equal quarterly amounts of 2.50% per quarter prior to March 17, 2020, with the remaining balance payable on March 17, 2020.
The obligations of Actavis Capital under the Term Loan Credit Agreement are guaranteed by Warner Chilcott Limited, Actavis, Inc. and Actavis Funding SCS and will be guaranteed by any subsidiary of Allergan plc (other than Actavis Capital or a direct subsidiary of Allergan plc) that becomes a guarantor of third party indebtedness in an aggregate principal amount exceeding $350.0 million (unless, in the case of a foreign subsidiary, such guarantee would give rise to adverse tax consequences as reasonably determined by Allergan plc).
Cash Bridge Loan Facility
On March 11, 2015, Allergan and certain of its subsidiaries entered into a 60-day senior unsecured bridge credit agreement (the “Cash Bridge Loan Facility”), among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Cash Bridge Lenders”), JPMCB, as administrative agent and the other financial institutions party thereto. Under the Cash Bridge Loan Facility, the Cash Bridge Lenders committed to provide, subject to certain conditions, unsecured bridge financing, of which $2.8 billion was drawn to finance the Allergan Acquisition on March 17, 2015. The outstanding balance of the Cash Bridge Loan Facility was repaid on April 9, 2015.
Borrowings under the Cash Bridge Loan Facility bore interest at our choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from 0.00% per annum to 1.00% per annum, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 1.00% per annum to 2.00% per annum, depending on the Debt Rating.
Revolving Credit Facility
On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a revolving credit loan and guaranty agreement (the “Revolver Agreement”) among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Revolving Lenders”), JPMCB as administrative agent, J.P. Morgan Europe Limited, as London agent, and the other financial institutions party thereto. Under the Revolver Agreement, the Revolving Lenders have committed to provide an unsecured revolving credit facility in an aggregate principal amount of up to $1.0 billion. The Revolver Agreement replaced Allergan plc’s existing $750.0 million second amended and restated Actavis revolving credit and guaranty agreement dated as of June 30, 2014 (the “Existing Revolver”) among Actavis Capital, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent and the lenders from time to time party thereto.
92
The Revolver Agreement provides that loans thereunder will bear interest, at our choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from 0.00% per annum to 1.00% per annum depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 0.875% per annum to 2.00% per annum depending on the Debt Rating. Additionally, to maintain availability of funds, the Company pays an unused commitment fee, which according to the pricing grid is set at 0.075% to 0.250% per annum, depending on the Debt Rating, of the unused portion of the revolver. The Revolving Credit Agreement will mature on December 17, 2019.
The obligations under the Revolver Agreement are guaranteed by Allergan plc, Warner Chilcott Limited, Actavis, Inc. and Actavis Funding SCS and will be guaranteed by any subsidiary of Allergan (other than Actavis Capital) that becomes a guarantor of third party indebtedness in an aggregate principal amount exceeding $350.0 million (unless, in the case of a foreign subsidiary, such guarantee would give rise to adverse tax consequences as reasonably determined by Allergan plc).
The Company is subject to, and as March 31, 2016 was in compliance with, all financial and operational covenants under the terms of the Revolving Credit Facility. At March 31, 2016, there were $900.0 million of outstanding borrowings under the Revolving Credit Facility and letters of credit outstanding were $28.8 million. The net availability under the Revolving Credit Facility was $71.2 million. The Company repaid $425.0 million of indebtedness under the Revolving Credit Facility in April 2016.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, net revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
The following discussion provides forward-looking quantitative and qualitative information about our potential exposure to market risk. Market risk represents the potential loss arising from adverse changes in the value of financial instruments. The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings. We are exposed to market risk for changes in the market values of our investments (Investment Risk), the impact of interest rate changes (Interest Rate Risk) and the impact of foreign currency exchange changes (Foreign Currency Exchange Risk).
We maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including both government and government agency obligations with ratings of A or better and money market funds. Our investments in marketable securities are governed by our investment policy which seeks to preserve the value of our principal, provide liquidity and maximize return on the Company’s investment against minimal interest rate risk. Consequently, our interest rate and principal risk are minimal on our non-equity investment portfolio. The quantitative and qualitative disclosures about market risk are set forth below.
Investment Risk
As of March 31, 2016, our total investments in marketable and equity securities of other companies, including equity method investments were $112.4 million (included in marketable securities and investments and other assets). The fair values of these investments are subject to significant fluctuations due to volatility of the stock market and changes in general economic conditions.
We regularly review the carrying value of our investments and identify and recognize losses, for income statement purposes, when events and circumstances indicate that any declines in the fair values of such investments below our accounting basis are other than temporary.
Interest Rate Risk
Our exposure to interest rate risk relates primarily to our non-equity investment portfolio and our floating rate debt. Our cash is invested in bank deposits and A-rated or better money market mutual funds.
Our portfolio of marketable securities includes U.S. treasury and agency securities classified as available-for-sale securities, with no security having a maturity in excess of two years. These securities are exposed to interest rate fluctuations. Because of the short-term nature of these investments, we are subject to minimal interest rate risk and do not believe that an increase in market rates would have a significant negative impact on the realized value of our portfolio.
93
At March 31, 2016, borrowings outstanding under the floating rate notes and term loan indebtedness were $9,106.4 million. Assuming a one percent increase in the applicable interest rate, annual interest expense would increase by approximately $91.1 million over the next twelve months.
Fixed Rate Debt
The Company has outstanding borrowings under its fixed rate notes. Changes in market interest rates generally affect the fair value of fixed-rate debt, but do not impact earnings or cash flows.
Foreign Currency Exchange Risk
Overall, we are a net recipient of currencies other than the U.S. dollar and, as such, benefit from a weaker dollar and are adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may negatively affect our consolidated revenues or operating costs and expenses as expressed in U.S. dollars.
From time to time, we enter into foreign currency option and forward contracts to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow our management to focus its attention on our core business issues. Accordingly, we enter into various contracts which change in value as foreign exchange rates change to allow the Company at its option to economically offset the effect of changes in the value of foreign currency assets and liabilities, commitments and anticipated foreign currency denominated sales and operating expenses. We enter into foreign currency option and forward contracts in amounts between minimum and maximum anticipated foreign exchange exposures.
We use foreign currency option contracts, which provide for the sale or purchase of foreign currencies, if exercised, to economically hedge the currency exchange risks associated with probable but not firmly committed transactions that arise in the normal course of our business. Probable but not firmly committed transactions are comprised primarily of sales of products and purchases of raw material in currencies other than the U.S. dollar. The foreign currency option contracts are entered into to reduce the volatility of earnings generated in currencies other than the U.S. dollar, primarily earnings denominated in the Euro. While these instruments are subject to fluctuations in value, such fluctuations are anticipated to offset changes in the value of the underlying exposures.
Net foreign currency gains and losses did not have a material effect on the Company’s results of operations for the three months ended March 31, 2016 and 2015, respectively.
Other
We do not believe that inflation has had a significant impact on our revenues or operations, nor do we have any material commodity price risks.
Evaluation of Disclosure Controls and Procedures
The Company maintains “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) of the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.
As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
94
Changes in Internal Control Over Financial Reporting
Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures over financial reporting for the period covered by this Form 10–Q. Based on this assessment, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2016, the Company’s disclosure controls and procedures are effective.
The Company transitioned the legacy Actavis Brand, Corporate U.S. and Canadian operations into the Legacy Allergan SAP Enterprise Resource Planning (“ERP”) system in January 2016. Other Brand subsidiaries are expected to transition to the Legacy Allergan SAP ERP system within 2016 and early 2017. The legacy Actavis SAP ERP systems will continue to be utilized for all generic operations, which will transition to Teva as part of the planned divestiture. Management also transitioned revenue management systems from the legacy Actavis Brand systems to the Legacy Allergan system for the administration of legacy Actavis Brand chargebacks, rebates and Medicaid claims. The legacy Actavis system will continue to be utilized for all generic operations which will transition to Teva as a part of the planned divestiture.
There have been no other changes in the Company’s internal control over financial reporting, during the fiscal quarter ended March 31, 2016, that has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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For information regarding legal proceedings, refer to “PART I, ITEM 3. LEGAL PROCEEDINGS,” of our Annual Report on Form 10-K for the year ended December 31, 2015 and “Legal Matters” in “NOTE 20 — Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Quarterly Report.
Except as set forth below, there have been no material changes in the Company’s risk factors from those disclosed in the Company’s Form 10-K for the year ended December 31, 2015.
Recent Sale of Unregistered Securities; Uses of Proceeds from Registered Securities
None.
Issuer Purchases of Equity Securities
During the quarter ended March 31, 2016, we repurchased 170,704 of our ordinary shares to satisfy tax withholding obligations in connection with the vesting of restricted shares issued to employees as follows:
Period |
|
Total Number of Shares Purchased |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publically Announced Program |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program |
|
||||
January 1 - 31, 2016 |
|
|
7,077 |
|
|
$ |
319.37 |
|
|
|
— |
|
|
|
— |
|
February 1 - 29, 2016 |
|
|
25,167 |
|
|
$ |
289.32 |
|
|
|
— |
|
|
|
— |
|
March 1 - 31, 2016 |
|
|
138,460 |
|
|
$ |
294.03 |
|
|
|
— |
|
|
|
— |
|
January 1 – March 31, 2016 |
|
|
170,704 |
|
|
$ |
294.38 |
|
|
|
— |
|
|
|
— |
|
Reference is hereby made to the Exhibit Index on page 98.
96
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 10, 2016.
ALLERGAN PLC WARNER CHILCOTT LIMITED |
||
|
|
|
By: |
|
/s/ Maria Teresa Hilado |
Name: |
|
Maria Teresa Hilado |
Title: |
|
Chief Financial Officer (Principal Financial Officer) |
|
|
|
By: |
|
/s/ James C. D’Arecca |
Name: |
|
James C. D’Arecca |
Title: |
|
Chief Accounting Officer (Principal Accounting Officer) |
97
Exhibit |
|
Description |
|
|
|
10.1 |
|
Termination Agreement, dated as of April 6, 2016, by and among Pfizer Inc., Allergan plc and certain other parties named therein, incorporated by reference to Exhibit 10.1 of Allergan plc’s Current Report on Form 8-K filed with the SEC on April 6, 2016. |
|
|
|
31.1* |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14a of the Securities Exchange Act of 1934. |
|
|
|
31.2* |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14a of the Securities Exchange Act of 1934. |
|
|
|
32.1** |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. of Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2** |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. of the Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
101.INS |
|
XBRL Instance Document. |
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Scheme Document. |
|
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF |
|
XBRL Taxonomy Extension Label Definition Document. |
|
|
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document. |
* |
Filed herewith. |
** |
Furnished herewith and not “filed” for purposes of Section 18 of the Exchange Act. |
98
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934
I, Brenton L. Saunders, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Allergan plc and Warner Chilcott Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 10, 2016 |
|
|
|
By: |
/s/ BRENTON L. SAUNDERS |
|
Brenton L. Saunders |
|
President and Chief Executive Officer |
|
(Principal Executive Officer) |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934
I, Maria Teresa Hilado, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Allergan plc and Warner Chilcott Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 10, 2016 |
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By: |
/s/ MARIA TERESA HILADO |
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Maria Teresa Hilado |
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Chief Financial Officer |
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(Principal Financial Officer) |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. of Section 1350, as Adopted by
Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned officer of Allergan plc and Warner Chilcott Limited (the “Companies”), hereby certifies, to such officer’s knowledge, that:
(i) the Quarterly Report on Form 10-Q of the Companies for the quarter ended March 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.
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Date: May 10, 2016 |
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By: |
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/s/ BRENTON L. SAUNDERS |
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Brenton L. Saunders |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. of Section 1350, as Adopted by
Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned officer of Allergan plc and Warner Chilcott Limited (the “Companies”), hereby certifies, to such officer’s knowledge, that:
(i) the Quarterly Report on Form 10-Q of the Companies for the quarter ended March 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.
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Date: May 10, 2016 |
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By: |
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/s/ MARIA TERESA HILADO |
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Maria Teresa Hilado |
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Chief Financial Officer |
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(Principal Financial Officer) |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2016 |
May. 02, 2016 |
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Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | AGN | |
Entity Registrant Name | Allergan plc | |
Entity Central Index Key | 0001578845 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 395,556,908 | |
Warner Chilcott Limited [Member] | ||
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | WARNER CHILCOTT LIMITED | |
Entity Central Index Key | 0001620602 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2016 |
Dec. 31, 2015 |
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Statement Of Financial Position [Abstract] | ||
Preferred shares, par value | $ 0.0001 | $ 0.0001 |
Preferred shares, shares authorized | 5,100,000 | 5,100,000 |
Preferred shares, shares issued | 5,100,000 | 5,100,000 |
Preferred shares, shares outstanding | 5,100,000 | 5,100,000 |
Ordinary shares, par value | $ 0.0001 | $ 0.0001 |
Ordinary shares, shares authorized | 1,000,000,000 | 1,000,000,000 |
Ordinary shares, shares issued | 395,400,000 | 394,500,000 |
Ordinary shares, shares outstanding | 395,400,000 | 394,500,000 |
General |
3 Months Ended |
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Mar. 31, 2016 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
General | NOTE 1 — General Allergan plc is focused on developing, manufacturing and commercializing innovative branded pharmaceuticals (“brand”, “branded” or “specialty brand”), high-quality generic and over-the-counter (“OTC”) medicines and biologic products for patients around the world. Allergan markets a portfolio of best-in-class products that provide valuable treatments for the central nervous system, eye care, medical aesthetics, gastroenterology, women's health, urology, cardiovascular and anti-infective therapeutic categories, and operates the world's third-largest global generics business, providing patients around the globe with increased access to affordable, high-quality medicines. Allergan is an industry leader in research and development, with one of the broadest development pipelines in the pharmaceutical industry and a leading position in the submission of generic product applications globally. With commercial operations in approximately 100 countries, Allergan is committed to working with physicians, healthcare providers and patients to deliver innovative and meaningful treatments that help people around the world live longer, healthier lives. Warner Chilcott Limited is a wholly-owned subsidiary of Allergan plc and has the same principal business activities. As a result of the Allergan Acquisition (defined below) which closed on March 17, 2015, the Company expanded its franchises to include ophthalmology, neurosciences and medical aesthetics/dermatology/plastic surgery, which complements the Company’s existing central nervous system, gastroenterology, women’s health and urology franchises. The combined company benefits significantly from Allergan, Inc’s. (“Legacy Allergan”) global brand equity and consumer awareness of key products, including Botox® and Restasis®. The Allergan Acquisition also expanded our presence and market and product reach across many international markets, with strengthened commercial positions across Canada, Europe, Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America. The results of our discontinued operations include the results of our generic product development, manufacturing and distribution of off-patent pharmaceutical products, established international brands marketed similarly to generic products and out-licensed generic pharmaceutical products primarily in Europe through our Medis third-party business. On July 26, 2015 we entered into a master purchase agreement (the “Teva Agreement”), under which Teva Pharmaceutical Industries Ltd. (“Teva”) agreed to acquire our global generic pharmaceuticals business and certain other assets (the “Teva Transaction”). Under the Teva Agreement, upon the closing of the Teva Transaction, we will receive $33.75 billion in cash and 100.3 million Teva ordinary shares (or American Depository Shares with respect thereto), which approximates $6.75 billion in Teva stock using the then-current stock price at the time the Teva Transaction was announced, in exchange for which Teva will acquire our global generics business, including the United States (“U.S.”) and international generic commercial units, our third-party supplier Medis, our global generic manufacturing operations, our global generic research and development (“R&D”) unit, our international OTC commercial unit (excluding OTC eye care products) and some established international brands. The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2016. As a result of the transaction, and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) number 2014-08 “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, the Company is accounting for the assets and liabilities to be divested as held for sale. Further, the financial results of the business held for sale have been reclassified to discontinued operations for all periods presented in our consolidated financial statements. The accompanying consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2015 (“Annual Report”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been condensed or omitted from the accompanying consolidated financial statements. The accompanying year end consolidated balance sheet was derived from the audited financial statements included in the Annual Report. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s consolidated financial position, results of operations, comprehensive income/(loss) and cash flows for the periods presented. Unless otherwise noted, all such adjustments are of a normal, recurring nature. All intercompany transactions and balances have been eliminated in consolidation. The Company’s results of operations, comprehensive income / (loss) and cash flows for the interim periods are not necessarily indicative of the results of operations, comprehensive income / (loss) and cash flows that it may achieve in future periods. In connection with the Allergan Acquisition, the Company changed its name from Actavis plc to Allergan plc. Actavis plc’s ordinary shares were traded on the NYSE under the symbol “ACT” until the opening of trading on June 15, 2015, at which time Actavis plc changed its corporate name to “Allergan plc” and changed its ticker symbol to “AGN.” Pursuant to Rule 12g-3(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Allergan plc is the successor issuer to Actavis plc’s ordinary shares which are deemed to be registered under Section 12(b) of the Exchange Act, and Allergan plc is subject to the informational requirements of the Exchange Act, and the rules and regulations promulgated thereunder. References throughout to “we,” “our,” “us,” the “Company” or “Allergan” refer to financial information and transactions of Allergan plc. References to “Warner Chilcott Limited” refer to Warner Chilcott Limited, the Company’s indirect wholly-owned subsidiary, and, unless the context otherwise requires, its subsidiaries. |
Reconciliation of Warner Chilcott Limited Results to Allergan plc Results |
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Adjusted Earnings Before Interest Taxes Depreciation And Amortization And Other Non Cash Items [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Warner Chilcott Limited Results to Allergan plc Results | NOTE 2 – Reconciliation of Warner Chilcott Limited results to Allergan plc results Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc (together with other Warner Chilcott Limited parents, the “Parent”), the ultimate parent of the group. The results of Warner Chilcott Limited are consolidated into the results of Allergan plc. Due to the deminimis activity between Allergan plc and Warner Chilcott Limited, references throughout this filing relate to both Allergan plc and Warner Chilcott Limited. Warner Chilcott Limited representations relate only to itself and not to any other company. Except where otherwise indicated, and excluding certain insignificant cash and non-cash transactions at the Allergan plc level, these notes relate to the consolidated financial statements for both separate registrants, Allergan plc and Warner Chilcott Limited. In addition to certain inter-company payable and receivable amounts between the entities, the following is a reconciliation of the results of Warner Chilcott Limited to Allergan plc ($ in millions):
The difference between general and administrative expenses in the three months ended March 31, 2016 and 2015 were due to corporate related expenses incurred at Allergan plc as well as non-recurring transaction costs. Movements in equity are due to historical differences in the results of operations of the companies and differences in equity awards. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | NOTE 3 — Summary of Significant Accounting Policies The following are interim updates to certain of the policies described in “Note 4” of the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2015 included in the Annual Report. Reclassifications In April 2015, the FASB issued guidance which changes the classification of debt issuance costs from being an asset on the balance sheet to netting the costs against the carrying value of the debt. As a result, the Company reclassified debt issuance costs as of December 31, 2015 by decreasing “prepaid expenses and other current assets” and “current portion of long-term debt and capital leases” by $36.3 million as well as decreasing “investments and other assets” and “long-term debt and capital leases” by $159.5 million. In addition, the Company made certain presentation reclassifications relating to segment results and guarantor financial statements. Revenue Recognition General Revenue from product sales is recognized when title and risk of loss to the product transfers to the customer, which is based on the transaction shipping terms. Recognition of revenue also requires reasonable assurance of collection of sales proceeds, the seller’s price to the buyer to be fixed or determinable and the completion of all performance obligations. The Company warrants products against defects and for specific quality standards, permitting the return of products under certain circumstances. Product sales are recorded net of all sales-related deductions including, but not limited to: chargebacks, trade discounts, billback adjustments, sales returns and allowances, commercial and government rebates, customer loyalty programs and fee for service arrangements with certain distributors, which we refer to in the aggregate as “SRA” allowances. Royalty and commission revenue is recognized as a component of net revenues in accordance with the terms of their respective contractual agreements when collectability is reasonably assured and when revenue can be reasonably measured. Provisions for SRAs As is customary in the pharmaceutical industry, our gross product sales are subject to a variety of deductions in arriving at reported net product sales. When the Company recognizes gross revenue from the sale of products, an estimate of SRA is recorded, which reduces the product revenues. Accounts receivable and/or accrued liabilities are also reduced and/or increased by the SRA amount depending on whether we have the right of offset with the customer. These provisions are estimated based on historical payment experience, historical relationship of the deductions to gross product revenues, government regulations, estimated utilization or redemption rates, estimated customer inventory levels and current contract sales terms. The estimation process used to determine our SRA provision has been applied on a consistent basis and no material revenue adjustments have been necessary to increase or decrease our reserves for SRA as a result of a significant change in underlying estimates. The Company uses a variety of methods to assess the adequacy of the SRA reserves to ensure that our financial statements are fairly stated. Chargebacks — A chargeback represents an amount payable in the future to a wholesaler for the difference between the invoice price paid by our wholesale customer for a particular product and the negotiated contract price that the wholesaler’s customer pays for that product. The chargeback provision and related reserve varies with changes in product mix, changes in customer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of the expected wholesaler sell-through levels to indirect customers at certain contract prices. The Company validates the chargeback accrual quarterly through a review of the inventory reports obtained from our largest wholesale customers. This customer inventory information is used to verify the estimated liability for future chargeback claims based on historical chargeback and contract rates. These large wholesalers represent the vast majority of the recipients of the Company’s chargeback payments. We continually monitor current pricing trends and wholesaler inventory levels to ensure the liability for future chargebacks is fairly stated. Rebates — Rebates include volume related incentives to direct and indirect customers, third-party managed care and Medicare Part D rebates, Medicaid rebates and other government rebates. Rebates are accrued based on an estimate of claims to be paid for product sold into trade by the Company. Volume rebates are generally offered to customers as an incentive to use the Company’s products and to encourage greater product sales. These rebate programs include contracted rebates based on customers’ purchases made during an applicable monthly, quarterly or annual period. The provision for third-party rebates is estimated based on our customers’ contracted rebate programs and the Company’s historical experience of rebates paid. Any significant changes to our customer rebate programs are considered in establishing the provision for rebates. The provisions for government rebates are based, in part, upon historical experience of claims submitted by the various states / authorities, contractual terms and government regulations. We monitor legislative changes to determine what impact such legislation may have on our provision. Cash Discounts — Cash discounts are provided to customers that pay within a specific period. The provision for cash discounts is estimated based upon invoice billings and historical customer payment experience. The Company’s experience of payment history is fairly consistent and most customer payments qualify for the cash discount. Returns and Other Allowances — The Company’s provision for returns and other allowances include returns, pricing adjustments, promotional allowances, loyalty cards and billback adjustments. Consistent with industry practice, the Company maintains a returns policy that allows customers to return product for a credit. In accordance with the Company’s policy, credits for customer returns of products are applied against outstanding account activity or are settled in cash. Product exchanges are not permitted. Customer returns of product are generally not resalable. The Company’s estimate of the provision for returns is based upon historical experience and current trends of actual customer returns. Additionally, we consider other factors when estimating the current period returns provision, including levels of inventory in the distribution channel, as well as significant market changes which may impact future expected returns. Pricing adjustments, which includes shelf stock adjustments, (primarily relate to our generics business held for sale) are credits issued to reflect price decreases in selling prices charged to the Company’s direct customers. Shelf stock adjustments are based upon the amount of product our customers have in their inventory at the time of an agreed-upon price reduction. The provision for shelf stock adjustments is based upon specific terms with the Company’s customers and includes estimates of existing customer inventory levels based upon their historical purchasing patterns. We regularly monitor all price changes to evaluate the Company’s reserve balances. The adequacy of these reserves is readily determinable as pricing adjustments and shelf stock adjustments are negotiated and settled on a customer-by-customer basis. Promotional allowances are credits that are issued in connection with a product launch or as an incentive for customers to carry our product. The Company establishes a reserve for promotional allowances based upon contractual terms. Billback adjustments, which primarily relate to our generics business held for sale, are credits that are issued to certain customers who purchase directly from us as well as indirectly through a wholesaler. These credits are issued in the event there is a difference between the customer’s direct and indirect contract price. The provision for billbacks is estimated based upon historical purchasing patterns of qualified customers who purchase product directly from us and supplement their purchases indirectly through our wholesale customers. Loyalty cards allow the end user patients a discount per prescription and are accrued based on historical experience, contract terms and the volume of product and cards in the distribution channel. Accounts receivable balances in the Company’s consolidated financial statements are presented net of SRA estimates. SRA balances in accounts receivable were $208.1 million and $263.8 million at March 31, 2016 and December 31, 2015, respectively. SRA balances within accounts payable and accrued expenses were $1,800.7 million and $1,570.0 million at March 31, 2016 and December 31, 2015, respectively. The movements in the SRA reserve balances for continuing operations in the three months ended March 31, 2016 are as follows ($ in millions):
The provisions recorded to reduce gross product sales to net product sales, excluding discontinued operations, were as follows ($ in millions):
The Company also had SRA reserves relating to discontinued operations of $1,598.3 million and $1,720.1 million as of March 31, 2016 and December 31, 2015, respectively. Litigation and Contingencies The Company is involved in various legal proceedings in the normal course of its business, including product liability litigation, intellectual property litigation, employment litigation and other litigation. Additionally, the Company, in consultation with its counsel, assesses the need to record a liability for contingencies on a case-by-case basis in accordance with FASB Accounting Standards Codification (“ASC”) Topic 450 “Contingencies” (“ASC 450”). Accruals are recorded when the Company determines that a loss related to a matter is both probable and reasonably estimable. These accruals are adjusted periodically as assessment efforts progress or as additional information becomes available. Acquired contingencies in business combinations are recorded at fair value to the extent determinable, otherwise in accordance ASC 450. Refer to “NOTE 20 — Commitments and Contingencies” for more information. Earnings Per Share (“EPS”) The Company computes EPS in accordance with ASC Topic 260, “Earnings Per Share” (“ASC 260”) and related guidance, which requires two calculations of EPS to be disclosed: basic and diluted. Basic EPS is computed by dividing net (loss) / income by the weighted average ordinary shares outstanding during a period. Diluted EPS is based on the treasury stock method and includes the effect from potential issuance of ordinary shares, such as shares issuable pursuant to the exercise of stock options and restricted stock units. Diluted EPS also includes the impact of ordinary share equivalents to be issued upon the mandatory conversion of the Company’s preferred shares. Ordinary share equivalents have been excluded where their inclusion would be anti-dilutive. A reconciliation of the numerators and denominators of basic and diluted EPS consisted of the following ($ in millions, except per share amounts):
Stock awards to purchase 5.4 million ordinary shares for the three months ended March 31, 2016, were outstanding, but not included in the computation of diluted EPS, because the awards were anti-dilutive for continuing operations and as such the treatment for discontinued operations is also anti-dilutive. The weighted average impact of ordinary share equivalents of 17.6 million for the three months ended March 31 2016, which are anticipated to result from the mandatory conversion of the Company’s preferred shares were not included in the calculation of diluted EPS as their impact would be anti-dilutive. Stock awards to purchase 3.5 million ordinary shares during the three months ended March 31, 2015 were outstanding, but not included in the computation of diluted EPS, because the impact of the awards were anti-dilutive for continuing operations and as such the treatment for discontinued operations is also anti-dilutive. The weighted average impact of ordinary share equivalents of 5.5 million which are anticipated to result from the mandatory conversion of the Company’s preferred shares as of March 31, 2015 were not included in the calculation of diluted EPS as their impact would be anti-dilutive. Restructuring Costs The Company records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. In accordance with existing benefit arrangements, employee severance costs are accrued when the restructuring actions are probable and estimable. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. The Company also incurs costs with contract terminations and costs of transferring products as part of restructuring activities. Refer to “NOTE 19 — Business Restructuring Charges” for more information. Recent Accounting Pronouncements On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), with an effective date for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, for public business entities, certain not-for-profit entities, and certain employee benefit plans. The effective date for ASU 2014-09 was deferred by one year through the issuance of ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations. In January 2016, the FASB issued Accounting Standards Update 2016-01, which changes the requirement to require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance is not anticipated to have a material impact on the Company’s financial position or results of operations. In February 2016, the FASB issued Accounting Standards Update 2016-02, which states that a lessee should recognize the assets and liabilities that arise from leases. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, the pronouncement will have on our financial positions and results of operations. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. The Company is evaluating the impact the pronouncement will have on our financial positions and results of operations. In March 2016, the FASB has issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 Revenue from Contracts with Customers requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (i.e., the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is an agent). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date and transition of these amendments is the same as the effective date and transition requirements in Topic 606. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations. In April 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations.
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Acquisitions and Other Agreements |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions and Other Agreements | NOTE 4 — Acquisitions and Other Agreements During the three months ended March 31, 2015, the Company acquired material assets and businesses. The pro forma results of the businesses acquired that materially impacted the reported results of the Company are as follows (unaudited; $ in millions except per share information):
Pro forma net (loss) per share includes the impact of share issuances as part of the Allergan Acquisition. 2016 Transactions The following are the material transactions that were completed in the three months ended March 31, 2016. Licenses and Asset Acquisitions Anterios On January 6, 2016, the Company acquired Anterios, Inc. (“Anterios”), a clinical stage biopharmaceutical company developing a next generation delivery system and botulinum toxin-based prescription products. Under the terms of the agreement, the Company acquired Anterios for an upfront net payment of approximately $90.0 million and potential development and commercialization milestone payments related to an investigational topical formulation of botulinum toxin type A in development for the potential treatment of hyperhidrosis, acne, and crow’s feet lines and the related NDS™, Anterios' proprietary platform delivery technology that enables local, targeted delivery of neurotoxins through the skin without the need for injections (“the Anterios Transaction”). Total future milestone payments could amount to $387.5 million. The Company concluded based on the stage of development of the assets, the lack of acquired employees as well as certain other inputs and processes that the transaction did not qualify as a business. The total upfront net payment of approximately $90.0 million was expensed as a component of R&D expense and the future milestones will be recorded when the payment becomes probable. 2015 Transactions The following are the material transactions that were completed in the year ended December 31, 2015. Acquisitions AqueSys On October 16, 2015, the Company acquired AqueSys, Inc. (“AqueSys”), a private, clinical-stage medical device company focused on developing ocular implants that reduce intraocular pressure (“IOP”) associated with glaucoma, in an all-cash transaction. Under the terms of the agreement, the Company acquired AqueSys for an acquisition accounting purchase price of $298.9 million, including $193.5 million for the estimated fair value of contingent consideration relating to the regulatory approval and commercialization milestone payments. The Company acquired AqueSys for its development program, including XEN45, a soft shunt that is implanted in the sub conjunctival space in the eye through a minimally invasive procedure with a single use, pre-loaded proprietary injector (the “AqueSys Acquisition”). Assets Acquired and Liabilities Assumed at Fair Value The AqueSys Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date ($ in millions):
Kythera On October 1, 2015, the Company acquired Kythera Biopharmaceuticals (“Kythera”), for $75 per share, or an acquisition accounting purchase price of $2,089.5 million (the “Kythera Acquisition”). Kythera was focused on the discovery, development and commercialization of novel prescription aesthetic products. Kythera’s lead product, Kybella® injection, is the first and only Food and Drug Administration (“FDA”) approved, non-surgical treatment for moderate to severe submental fullness, commonly referred to as double chin. Assets Acquired and Liabilities Assumed at Fair Value The Kythera Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date ($ in millions):
Auden Mckenzie On May 29, 2015 the Company acquired Auden Mckenzie Holdings Limited (“Auden”), a company specializing in the development, licensing and marketing of niche generic medicines and proprietary brands in the United Kingdom (“UK”) and across Europe for approximately 323.7 million British Pounds, or $495.9 million (the “Auden Acquisition”). The assets and liabilities acquired, as well as the results of operations for the acquired Auden business are part of the assets being divested in the Teva Transaction and are included as a component of income from discontinued operations. In addition the acquired financial position is included in assets and liabilities held for sale.
Recognition and Measurement of Assets Acquired and Liabilities Assumed at Fair Value The Auden Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The following table summarizes the final fair values of the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date ($ in millions):
Allergan On March 17, 2015, the Company acquired Legacy Allergan for approximately $77.0 billion including outstanding indebtedness assumed of $2.2 billion, cash consideration of $40.1 billion and equity consideration of $34.7 billion, which includes outstanding equity awards (the “Allergan Acquisition”). Under the terms of the agreement, Legacy Allergan shareholders received 111.2 million of the Company’s ordinary shares, 7.0 million of the Company’s non-qualified stock options and 0.5 million of the Company’s share units. The addition of Allergan Inc.’s therapeutic franchises in ophthalmology, neurosciences and medical aesthetics/dermatology/plastic surgery complements the Company’s existing central nervous system, gastroenterology, women’s health and urology franchises. The combined company will also benefit significantly from Legacy Allergan’s global brand equity and consumer awareness of key products, including Botox® and Restasis®. The transaction also expands our presence and market and product reach across many international markets, with strengthened commercial positions across Canada, Europe, Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America. Inventories The fair value of inventories acquired included an acquisition accounting fair market value step-up of $923.9 million. In the three months ended March 31, 2016 and 2015, the Company recognized $21.6 million and $71.0 million, respectively, as a component of cost of sales as the inventory acquired was sold to the Company’s customers. Acquisition-Related Expenses As a result of the acquisition, the Company incurred the following transaction and integration costs in the three months ended March 31, 2016 and 2015 ($ in millions):
Licenses and Asset Acquisitions Migraine License On August 17, 2015, the Company entered into an agreement with Merck & Co. (“Merck”) under which the Company acquired the exclusive worldwide rights to Merck’s early development stage investigational small molecule oral calcitonin gene-related peptide receptor antagonists, which are being developed for the treatment and prevention of migraines (the “Merck Transaction”). The Merck Transaction is being accounted for as an asset acquisition. The Company acquired these rights for an upfront charge of $250.0 million. The Company concluded based on the stage of development of the assets, the lack of acquired employees and manufacturing as well as certain other inputs and processes that the transaction did not qualify as a business. The Company paid $125.0 million in the year ended December 31, 2015 and the remaining $125.0 million was paid in April 2016. Additionally, Merck is owed contingent payments based on commercial and development milestones of up to $965.0 million as well as royalties. Divestitures Respiratory Business As part of the Forest Acquisition (defined below), we acquired certain assets that comprised Legacy Forest’s branded respiratory business in the U.S. and Canada (the “Respiratory Business”). During the year ended December 31, 2014, we held for sale respiratory assets of $734.0 million, including allocated goodwill to this unit of $309.1 million. On March 2, 2015, the Company sold the Respiratory Business to AstraZeneca plc (“AstraZeneca”) for consideration of $600.0 million upon closing, additional funds to be received for the sale of certain of our inventory to AstraZeneca and low single-digit royalties above a certain revenue threshold. AstraZeneca also paid Allergan an additional $100.0 million and Allergan has agreed to a number of contractual consents and approvals, including certain amendments to the ongoing collaboration agreements between AstraZeneca and Allergan (the “Respiratory Sale”). As a result of the final terms of the agreement, in the quarter ended March 31, 2015, the Company recognized an incremental charge in cost of sales (including the acquisition accounting fair value mark-up of inventory) relating to inventory that will not be sold to AstraZeneca of $35.3 million. The Company also recognized a gain on the sale of the business of $33.5 million, which is included within other (expense) income. 2014 Transactions The following are the material transactions that were completed in the year ended December 31, 2014. Durata Therapeutics On November 17, 2014, the Company completed its tender offer to purchase all of the outstanding shares of Durata Therapeutics, Inc. (“Durata”), an innovative pharmaceutical company focused on the development and commercialization of novel therapeutics for patients with infectious diseases and acute illnesses (the “Durata Acquisition”). Allergan purchased all outstanding shares of Durata, which were valued at approximately $724.5 million, including the assumption of debt. Additionally, there is one contingent value right (“CVR”) per share, entitling the holder to receive additional cash payments of up to $5.00 per CVR if certain regulatory or commercial milestones related to Durata’s lead product Dalvance™ are achieved. The CVR had an acquisition date fair value of $49.0 million. Contingent Consideration At the time of the Durata Acquisition, additional consideration was conditionally due to the seller based upon the approval of DalvanceTM in Europe, the approval of a single dose indication and the product reaching certain sales milestones. The Company estimated the acquisition accounting fair value of the contingent consideration to be $49.0 million using a probability weighted approach that considered the possible outcomes based on assumptions related to the timing and probability of the product launch date, discount rates matched to the timing of the payment, and probability of success rates and discount adjustments on the related cash flows. On March 2, 2015, the Company announced that the European Commission had granted Allergan’s subsidiary Durata Therapeutics International B.V., marketing authorization for Xydalba™ (dalbavancin) for the treatment of acute bacterial skin and skin structure infections (ABSSSI) in adults. The approval triggered the first CVR payment in the quarter ended March 31, 2015 of $30.9 million. In January 2016, the Company received approval from the FDA for an expanded label that will include a single dose of Dalvance®, which triggered a second CVR payment of $30.9 million in the quarter ended March 31, 2016. The difference between the probability weighted fair value and the final payments are recorded as a component of cost of sales. Forest Laboratories On July 1, 2014, the Company acquired Forest Laboratories, Inc. (“Legacy Forest”) for $30.9 billion including outstanding indebtedness assumed of $3.3 billion, equity consideration of $20.6 billion, which includes outstanding equity awards, and cash consideration of $7.1 billion (the “Forest Acquisition”). Under the terms of the transaction, Legacy Forest shareholders received 89.8 million Allergan plc ordinary shares, 6.1 million Allergan plc non-qualified stock options and 1.1 million Allergan plc share units. Legacy Forest was a leading, fully integrated, specialty pharmaceutical company largely focused on the United States market. Legacy Forest marketed a portfolio of branded drug products and developed new medicines to treat patients suffering from diseases principally in the following therapeutic areas: central nervous system, cardiovascular, gastrointestinal, respiratory, anti-infective, and cystic fibrosis. A portion of the assets acquired are being divested as part of the Teva Transaction. Inventories The fair value of inventories acquired included an acquisition accounting fair market value step-up of $1,036.3 million. In the three months ended March 31, 2016 and 2015, the Company recognized $20.1 million and $136.8 million, respectively, as a component of cost of sales as the inventory acquired on July 1, 2014 was sold to the Company’s customers in addition to a write-off associated with the Respiratory Sale. A portion of these amounts are included in discontinued operations in the three months ended March 31, 2015. As a result of the Forest Acquisition, the Company incurred the following transaction and integration costs in the three months ended March 31, 2016 and March 31, 2015, respectively ($ in millions):
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Discontinued Operations |
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Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | NOTE 6 – Assets Held For Sale The following represents net assets held for sale ($ in millions):
As of March 31, 2016 and December 31, 2015, the Company had the following assets held for sale:
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Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | NOTE 5 — Discontinued Operations Global Generics Business On July 27, 2015, the Company announced that it entered into the Teva Transaction. Under the Teva Agreement, Teva will acquire Allergan's global generics business, including the U.S. and international generic commercial units, our third-party supplier Medis, our global generic manufacturing operations, our global generic R&D unit, our international OTC commercial unit (excluding OTC eye care products) and some established international brands. Allergan will retain its global branded pharmaceutical and medical aesthetics businesses, as well as its biosimilars development programs, certain OTC products, and the Anda Distribution business. The Company will also have continuing involvement with Teva after the close of the transaction. As a result of the Teva Transaction, the Company will hold equity in Teva, continue to distribute products divested to Teva through our Anda Distribution segment as well as purchase product manufactured by Teva for sale in our US Brands segment as part of ongoing transitional service and contract manufacturing agreements. Financial results of the global generics business are presented as "Income from discontinued operations" on the Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015; and assets and liabilities of the global generics business to be disposed of are presented as "Current assets held for sale", "Non current assets held for sale", “Current liabilities held for sale” and “Long term liabilities held for sale” on the Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015. The following table presents key financial results of the global generics business included in "Income from discontinued operations" for the three months ended March 31, 2016 and 2015 ($ in millions):
Related party revenues represent the sale of products to the Company’s Anda Distribution segment. For the period ended March 31, 2016, the Company recorded a deferred tax benefit of $116.1 million related to investments in certain subsidiaries. The recognition of this benefit has been reflected in income from discontinued operations, net of tax with the deferred tax asset reflected in non-current deferred tax assets on the balance sheet. The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the global generics business to be disposed of ($ in millions):
Depreciation and amortization was ceased upon the determination that the held for sale criteria were met, which was the announcement date of the Teva Transaction. The depreciation, amortization and significant operating and investing non-cash items of the discontinued operations were as follows ($ in millions):
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Discontinued Operations | NOTE 6 – Assets Held For Sale The following represents net assets held for sale ($ in millions):
As of March 31, 2016 and December 31, 2015, the Company had the following assets held for sale:
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Share-Based Compensation |
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Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | NOTE 7 — Share-Based Compensation The Company recognizes compensation expense for all share-based compensation awards made to employees and directors based on the fair value of the awards on the date of grant. A summary of the Company’s share-based compensation plans is presented below. Equity Award Plans The Company has adopted several equity award plans which authorize the granting of options, restricted shares, restricted stock units and other forms of equity awards of the Company’s ordinary shares, subject to certain conditions. The Company granted/grants awards with the following features:
Option award plans require options to be granted at the fair value of the shares underlying the options at the date of the grant and generally become exercisable over periods ranging from three to five years. Each option granted expires ten years from the date of the grant. Restricted stock awards are grants that entitle the holder to ordinary shares, subject to certain terms. Restricted stock unit awards are grants that entitle the holder the right to receive an ordinary share, subject to certain terms. Restricted stock and restricted stock unit awards (both time-based vesting and performance-based vesting) generally have restrictions eliminated over a one to four year vesting period. Restrictions generally lapse for non-employee directors after one year. Certain restricted stock units are performance-based awards issued at a target number with the actual number of restricted shares issued ranging based on achievement of the performance criteria. The Company’s equity awards include the acquired awards from the Allergan and Kythera acquisitions (“2015 Acquired Awards”). Fair Value Assumptions All restricted stock and restricted stock units (whether time-based vesting or performance-based vesting), are granted and expensed, using the fair value per share on the applicable grant date, over the applicable vesting period. Non-qualified options to purchase ordinary shares are granted to employees at exercise prices per share equal to the closing market price per share on the date of grant. The fair value of non-qualified options is determined on the applicable grant dates using the Black-Scholes method of valuation and that amount is recognized as an expense over the vesting period. Using the Black-Scholes valuation model, the fair value of options is based on the following assumptions:
Share-Based Compensation Expense Share-based compensation expense recognized in the Company’s results of operations for the three months ended March 31, 2016 and 2015 were as follows ($ in millions):
Included in the table above is stock-based compensation relating to discontinued operations of $7.8 million and $10.4 million for the three months ended March 31, 2016 and 2015, respectively. Included in the equity-based compensation awards for the three months ended March 31, 2016 is the impact of accelerations and step-ups relating to the acquisition accounting treatment of outstanding awards acquired in the Allergan and Forest acquisitions of $34.2 million and $12.9 million, respectively. Included in the three months ended March 31, 2015 is the impact of accelerations and step-ups relating to the acquisition accounting treatment of outstanding awards acquired in the Allergan and Forest acquisitions of $119.7 million and $44.9 million, respectively. Unrecognized future stock-based compensation expense was $736.9 million as of March 31, 2016, including $263.6 million from the Allergan Acquisition and $92.7 million from the Forest Acquisition. This amount will be recognized as an expense over a remaining weighted average period of 1.7 years. Stock-based compensation is being amortized and charged to operations over the same period as the restrictions are eliminated for the participants, which is generally on a straight-line basis. Share Activity The following is a summary of equity award activity for unvested restricted stock and stock units in the period from December 31, 2015 through March 31, 2016:
The following is a summary of equity award activity for non-qualified options to purchase ordinary shares in the period from December 31, 2015 through March 31, 2016:
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Reportable Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reportable Segments | NOTE 8 — Reportable Segments In the third quarter of 2015, there was a strategic shift in the business as a result of the Teva Transaction. The Company currently manages its continuing operations in the following segments: US Brands, US Medical Aesthetics, International Brands and Anda Distribution. Beginning in the second quarter of 2016, the Company will have four reporting segments. The first segment, US Specialized Therapeutics includes the U.S. Eye Care, Medical Aesthetics, Medical Dermatology and Botox Therapeutic. The second segment is the U.S. General Medicine unit, which includes Central Nervous System (“CNS”), Gastrointestinal, Women’s Health and Anti-Infective therapeutic areas. The third segment is the Company’s International unit. The fourth segment is the Company’s distribution business, Anda Distribution. In addition, certain revenues and shared costs and the results of corporate initiatives are managed outside of the four segments. Prior period results have been recast to align to the current segment presentation. The operating segments are organized as follows:
The Company evaluates segment performance based on segment contribution. Segment contribution for segments represents net revenues less cost of sales (defined below), selling and marketing expenses, and select general and administrative expenses. The Company does not evaluate the following items at the segment level:
The Company defines segment net sales as product sales and other revenue derived from branded products or licensing agreements. In March 2015, as a result of the Allergan Acquisition, we began to promote Restasis®, Lumigan®/Ganfort®, Alphagan®/Combigan®, Botox®, fillers, other aesthetic products and other eye care products. In the quarter ended March 31, 2016, the Company changed its measure of segment cost of sales. Cost of sales within segment contribution now includes standard production and packaging costs for the products we manufacture, third party acquisition costs for products manufactured by others, profit-sharing or royalty payments for products sold pursuant to licensing agreements and finished goods inventory reserve charges. Cost of sales included within segment contribution does not include non-standard production costs, such as non-finished goods inventory obsolescence charges, manufacturing variances and excess capacity utilization charges, where applicable. Cost of sales does not include amortization or impairment costs for acquired product rights or other acquired intangibles. Selling and marketing expenses consist mainly of personnel-related costs, product promotion costs, distribution costs, professional service costs, insurance, depreciation and travel costs. General and administrative expenses consist mainly of personnel-related costs, facilities costs, transaction costs, insurance, depreciation, litigation and settlement costs and professional services costs which are general in nature and attributable to the segment. Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three months ended March 31, 2016 and 2015 ($ in millions):
The following is a reconciliation of net revenues for the operating segments to the Company’s net revenues for the three months ended March 31, 2016 and 2015 ($ in millions):
No other country represents ten percent or more of net revenues outside of the United States. The US Brands, US Medical Aesthetics, and Anda Distribution segments are comprised solely of sales within the United States. The following tables present global net revenues for the top products of the Company for the three months ended March 31, 2016 and 2015 ($ in millions):
No other product represents ten percent or more of total net revenues. The following table presents net revenues for the US Brands segment for the three months ended March 31, 2016 and 2015 ($ in millions):
The following table presents revenues for the US Medical Aesthetics segment for the three months ended March 31, 2016 and 2015 ($ in millions):
The following table presents net revenues for the International Brands segment for the three months ended March 31, 2016 and 2015 ($ in millions):
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Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | NOTE 9 — Inventories Inventories consist of finished goods held for sale and distribution, raw materials and work-in-process. Inventories are stated at the lower of cost (first-in, first-out method) or market (net realizable value). The Company writes down inventories to net realizable value based on forecasted demand, market conditions or other factors, which may differ from actual results. Inventories consisted of the following ($ in millions):
As of March 31, 2016, finished goods included a de minimis amount related to the fair-value step-up of acquired inventory. Included in finished goods was $46.1 million related to the fair-value step-up of acquired inventory as of December 31, 2015.
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Investments and Other Assets |
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Investments All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments and Other Assets | NOTE 10 — Investments and Other Assets Investments in marketable securities, other investments and other assets consisted of the following ($ in millions):
The Company’s marketable securities and other long-term investments are classified as available-for-sale and are recorded at fair value based on quoted market prices using the specific identification method. These investments are classified as either current or non-current, as appropriate, in the Company’s consolidated balance sheets. |
Accounts Payable and Accrued Expenses |
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Accounts Payable and Accrued Expenses | NOTE 11 — Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following ($ in millions):
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Goodwill, Product Rights and Other Intangible Assets |
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Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill, Product Rights and Other Intangible Assets | NOTE 12 — Goodwill, Product Rights and Other Intangible Assets Goodwill for the Company’s segments consisted of the following ($ in millions):
As of March 31, 2016 and December 31, 2015, the gross balance of goodwill, pre-impairments, was $46,741.3 million and $46,568.8 million, respectively. Goodwill in discontinued operations was $6,092.7 million and $6,009.7 million as of March 31, 2016 and December 31, 2015, respectively. Product rights and other intangible assets consisted of the following ($ in millions):
Assuming no additions, disposals or adjustments are made to the carrying values and/or useful lives of the intangible assets, annual amortization expense on product rights and other related intangibles as of March 31, 2016 over the remainder of 2016 and each of the next five years is estimated to be as follows ($ in millions):
The above amortization expense is an estimate. Actual amounts may change from such estimated amounts due to fluctuations in foreign currency exchange rates, additional intangible asset acquisitions, finalization of preliminary fair value estimates, potential impairments, accelerated amortization or other events. |
Long-Term Debt and Capital Leases |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt and Capital Leases | NOTE 13 — Long-Term Debt and Capital Leases Total debt and capital leases consisted of the following ($ in millions):
Fair market value in the table above is determined in accordance with ASC Topic 820 “Fair Value Measurement” (“ASC 820”) under Level 2 based upon quoted prices for similar items in active markets. The book value of the outstanding term loan indebtedness approximates fair value as the debt is at variable interest rates and re-prices frequently. Unless otherwise indicated, the remaining loan balances after the quarterly required payments are due upon maturity. Floating Rate Notes On March 4, 2015, Actavis Funding SCS, a limited partnership (société en commandite simple) organized under the laws of the Grand Duchy of Luxembourg and an indirect wholly-owned subsidiary of Allergan plc, issued floating rate notes due 2016 (the “2016 Floating Rate Notes”), floating rate notes due 2018 (the “2018 Floating Rate Notes”), floating rate notes due 2020 (the “2020 Floating Rate Notes”), 1.850% notes due 2017 (the “1.850% 2017 Notes”), 2.350% notes due 2018 (the “2.350% 2018 Notes”), 3.000% notes due 2020 (the “3.000% 2020 Notes”), 3.450% notes due 2022 (the “3.450% 2022 Notes”), 3.800% notes due 2025 (the “3.800% 2025 Notes”), 4.550% notes due 2035 (the “4.550% 2035 Notes”) and 4.750% notes due 2045 (the “4.750% 2045 Notes”). The notes are fully and unconditionally guaranteed by Actavis Funding SCS’s indirect parents, Warner Chilcott Limited and Actavis Capital S.a.r.l. (“Actavis Capital”), and by Actavis, Inc., a subsidiary of Actavis Capital, on an unsecured and unsubordinated basis. Allergan plc has not guaranteed the notes. The 2016 Floating Rate Notes, the 2018 Floating Rate Notes and the 2020 Floating Rate Notes bear interest at a floating rate equal to three-month LIBOR plus 0.875%, 1.080% and 1.255% per annum, respectively. Interest on the 2016 Floating Rate Notes is payable quarterly on March 1, June 1, September 1 and December 1 of each year, and began on June 1, 2015. Interest on the 2018 Floating Rate Notes and the 2020 Floating Rate Notes is payable quarterly on March 12, June 12, September 12 and December 12 of each year, and began on June 12, 2015. Fixed Rate Notes The Company has issued fixed rate notes over multiple issuances for various business needs. Interest on the various notes is generally payable semi-annually with various payment dates. Acquired Allergan Notes On March 17, 2015 in connection with the Allergan Acquisition, the Company acquired, and subsequently guaranteed, along with Warner Chilcott Limited, the indebtedness of Allergan, Inc. comprised of the $350.0 million 2.800% senior notes due 2023, the $650.0 million 3.375% senior notes due 2020, the $250.0 million 1.350% senior notes due 2018 and the $800.0 million 5.750% senior notes due 2016. Interest payments are due on the $350.0 million senior notes semi-annually on the principal amount of the notes at a rate of 2.80% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption, if the redemption occurs prior to December 15, 2022 (three months prior to the maturity of the 2023 senior notes). If the redemption occurs on or after December 15, 2022, then such redemption is not subject to the make-whole provision. Interest payments are due on the $650.0 million senior notes semi-annually on the principal amount of the notes at a rate of 3.375% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. Interest payments are due on the $250.0 million senior notes semi-annually on the principal amount of the notes at a rate of 1.350% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. Interest payments are due on the $800.0 million senior notes semi-annually on the principal amount of the notes at a rate of 5.750% per annum, and were redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. The fair value of the acquired senior notes was determined to be $2,087.5 million as of March 17, 2015. As such, as part of acquisition accounting, the company recorded a premium of $37.5 million to be amortized as contra interest over the life of the notes. The $800.0 million 5.750% senior notes were paid in full on April 1, 2016 with proceeds from the $900.0 million of borrowings under the revolving credit facility. Credit Facility Indebtedness WC Term Loan On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a second amendment agreement (the “WC Term Loan Amendment”) among Allergan plc, Warner Chilcott Limited, Warner Chilcott Finance, LLC, Actavis WC 2 S.à r.l. (“Actavis WC 2”), Warner Chilcott Company, LLC (“WCCL”), Warner Chilcott Corporation (“WC Corporation” and together with Actavis WC 2 and WCCL, the “WC Borrowers”), Bank of America, N.A. (“BofA”), as administrative agent, and the lenders party thereto. The WC Term Loan Amendment amends and restates Allergan plc’s existing amended and restated WC term loan credit and guaranty agreement, dated as of June 9, 2014 (such agreement, prior to its amendment and restatement pursuant to the WC Term Loan Amendment, the “2014 WC Term Loan”), among the WC Borrowers, Allergan plc, Warner Chilcott Limited, Warner Chilcott Finance, LLC, the lenders from time to time party thereto and BofA, as administrative agent, which amended and restated Allergan plc’s existing WC term loan credit and guaranty agreement, dated as of August 1, 2013 (such agreement, prior to its amendment and restatement pursuant to the 2014 WC Term Loan Amendment, the “Existing WC Term Loan”) among the WC Borrowers, Warner Chilcott Finance, LLC, Actavis Limited, BofA, as administrative agent and a syndicate of banks participating as lenders. Pursuant to the Existing WC Term Loan, on October 1, 2013 (the “WC Closing Date”), the lenders party thereto provided term loans in a total aggregate principal amount of $2.0 billion, comprised of (i) a $1.0 billion tranche that will mature on October 1, 2016 (the “WC Three Year Tranche”) and (ii) a $1.0 billion tranche that will mature on October 1, 2018 (the “WC Five Year Tranche”). The proceeds of borrowings under the Existing WC Term Loan Agreement, together with $41.0 million of cash on hand, were used to finance the repayment in full of all amounts outstanding under Warner Chilcott’s then-existing Credit Agreement, dated as of March 17, 2011, as amended by Amendment No. 1 on August 20, 2012, among the WC Borrowers, Warner Chilcott Holdings Company III, Limited, BofA, as administrative agent and a syndicate of banks participating as lenders. In the three months ended March 31, 2016, the Company prepaid $311.7 million of WC Term Loan indebtedness. Borrowings under the WC Term Loan Agreement bear interest at the applicable borrower’s choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from (x) 0.00% per annum to 0.75% per annum under the WC Three Year Tranche and (y) 0.125% per annum to 0.875% per annum under the WC Five Year Tranche, depending on the publicly announced debt ratings for non-credit-enhanced, senior unsecured long-term indebtedness of Allergan plc (such applicable debt rating the “Debt Rating”) or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 1.75% per annum under the WC Three Year Tranche and (y) 1.125% per annum to 1.875% per annum under the WC Five Year Tranche, depending on the Debt Rating. The outstanding principal amount of loans under the WC Three Year Tranche is not subject to quarterly amortization and shall be payable in full on the three year anniversary of the WC Closing Date. The outstanding principal amount of loans under the WC Five Year Tranche is payable in equal quarterly amounts of 2.50% per quarter prior to the fifth anniversary of the WC Closing Date, with the remaining balance payable on the fifth year anniversary of the WC Closing Date. The Company is subject to, and, at March 31, 2016, was in compliance with, all financial and operational covenants under the terms of the WC Term Loan. ACT Term Loan On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a third amendment agreement (the “ACT Term Loan Amendment”) among Allergan plc, Warner Chilcott Limited, Actavis Capital, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent, and the lenders party thereto. The ACT Term Loan Amendment amends and restates Allergan plc’s existing second amended and restated Allergan term loan credit and guaranty agreement, dated as of March 31, 2014 (such agreement, prior to its amendment and restatement pursuant to the ACT Term Loan Amendment, the “2014 ACT Term Loan Agreement” and together with the Existing ACT Term Loan Agreement (defined below), the “ACT Term Loan”) among Actavis Capital, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent, and the lenders from time to time party thereto, which amended and restated Allergan plc’s existing amended and restated Allergan term loan credit and guaranty agreement, dated as of October 1, 2013 (such agreement, prior to its amendment and restatement pursuant to the ACT Term Loan Amendment, the “Existing ACT Term Loan Agreement”) among Actavis Capital, Allergan plc, Actavis, Inc., BofA, as administrative agent, and the lenders from time to time party thereto. The Existing ACT Term Loan Agreement amended and restated Actavis, Inc.’s $1,800.0 million senior unsecured term loan credit facility, dated as of June 22, 2012. At the closing of the Existing ACT Term Loan Agreement, an aggregate principal amount of $1,572.5 million was outstanding (the “2017 Term Loan”). The 2017 Term Loan matures on October 31, 2017. The outstanding principal amount of the 2017 Term Loan is payable in equal quarterly installments of 2.50% per quarter, with the remaining balance payable on the maturity date. In the three months ended March 31, 2016, the Company prepaid $200.0 million of ACT Term Loan indebtedness. On March 31, 2014, Allergan plc, Actavis Capital, Actavis, Inc., BofA, as Administrative Agent, and a syndicate of banks participating as lenders entered into the 2014 ACT Term Loan Agreement to amend and restate the Existing ACT Term Loan Agreement. On July 1, 2014, in connection with the Forest Acquisition, the Company borrowed $2.0 billion of term loan indebtedness under tranche A-2 of the 2014 ACT Term Loan Agreement, which is due July 1, 2019 (the “2019 Term Loan”). The outstanding principal amount of the 2019 Term Loan is payable in equal quarterly installments of 2.50% per quarter, with the remaining balance payable on the maturity date. The ACT Term Loan provides that loans thereunder will bear interest, at the Company’s choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from (x) 0.00% per annum to 1.00% per annum with respect to the 2017 term-loan and (y) 0.125% per annum to 0.875% per annum with respect to the 2019 term-loan, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 2.00% per annum with respect to the 2017 term-loan and (y) 1.125% per annum to 1.875% per annum with respect to the 2019 term-loan, depending on the Debt Rating. The Company is subject to, and at March 31, 2016 was in compliance with, all financial and operational covenants under the terms of the ACT Term Loan. AGN Term Loan On December 17, 2014, Allergan, Inc. and certain of its subsidiaries entered into a senior unsecured term loan credit agreement (the “AGN Term Loan”), among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Term Lenders”), JPMorgan Chase Bank, N.A. (“JPMCB”), as administrative agent and the other financial institutions party thereto. Under the AGN Term Loan, the Term Lenders provided (i) a $2.75 billion tranche maturing on March 17, 2018 (the “AGN Three Year Tranche”) and (ii) a $2.75 billion tranche and maturing on March 17, 2020 (the “AGN Five Year Tranche”). The proceeds of borrowings under the AGN Term Loan were to be used to finance, in part, the cash component of the Allergan Acquisition consideration and certain fees and expenses incurred in connection with the Allergan Acquisition. Borrowings under the AGN Term Loan bear interest at our choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from (x) 0.00% per annum to 1.00% per annum under the AGN Three Year Tranche and (y) 0.125% per annum to 1.250%% per annum under the AGN Five Year Tranche, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 2.00% per annum under the AGN Three Year Tranche and (y) 1.125% per annum to 2.250% per annum under the AGN Five Year Tranche, depending on the Debt Rating. The outstanding principal amount of loans under the AGN Three Year Tranche is not subject to quarterly amortization and shall be payable in full on the maturity date. The outstanding principal amount of loans under the AGN Five Year Tranche is payable in equal quarterly amounts of 2.50% per quarter prior to March 17, 2020, with the remaining balance payable on March 17, 2020. The obligations of Actavis Capital under the Term Loan Credit Agreement are guaranteed by Warner Chilcott Limited, Actavis, Inc. and Actavis Funding SCS and will be guaranteed by any subsidiary of Allergan plc (other than Actavis Capital or a direct subsidiary of Allergan plc) that becomes a guarantor of third party indebtedness in an aggregate principal amount exceeding $350.0 million (unless, in the case of a foreign subsidiary, such guarantee would give rise to adverse tax consequences as reasonably determined by Allergan plc). Cash Bridge Loan Facility On March 11, 2015, Allergan and certain of its subsidiaries entered into a 60-day senior unsecured bridge credit agreement (the “Cash Bridge Loan Facility”), among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Cash Bridge Lenders”), JPMCB, as administrative agent and the other financial institutions party thereto. Under the Cash Bridge Loan Facility, the Cash Bridge Lenders committed to provide, subject to certain conditions, unsecured bridge financing, of which $2.8 billion was drawn to finance the Allergan Acquisition on March 17, 2015. The outstanding balance of the Cash Bridge Loan Facility was repaid on April 9, 2015. Borrowings under the Cash Bridge Loan Facility bore interest at our choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from 0.00% per annum to 1.00% per annum, depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 1.00% per annum to 2.00% per annum, depending on the Debt Rating. Revolving Credit Facility On December 17, 2014, Allergan plc and certain of its subsidiaries entered into a revolving credit loan and guaranty agreement (the “Revolver Agreement”) among Actavis Capital, as borrower, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, the lenders from time to time party thereto (the “Revolving Lenders”), JPMCB as administrative agent, J.P. Morgan Europe Limited, as London agent, and the other financial institutions party thereto. Under the Revolver Agreement, the Revolving Lenders have committed to provide an unsecured revolving credit facility in an aggregate principal amount of up to $1.0 billion. The Revolver Agreement replaced Allergan plc’s existing $750.0 million second amended and restated Actavis revolving credit and guaranty agreement dated as of June 30, 2014 (the “Existing Revolver”) among Actavis Capital, Allergan plc, Warner Chilcott Limited, Actavis, Inc., Actavis Funding SCS, BofA, as administrative agent and the lenders from time to time party thereto. The Revolver Agreement provides that loans thereunder will bear interest, at our choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from 0.00% per annum to 1.00% per annum depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 0.875% per annum to 2.00% per annum depending on the Debt Rating. Additionally, to maintain availability of funds, the Company pays an unused commitment fee, which according to the pricing grid is set at 0.075% to 0.250% per annum, depending on the Debt Rating, of the unused portion of the revolver. The Revolving Credit Agreement will mature on December 17, 2019. The obligations under the Revolver Agreement are guaranteed by Allergan plc, Warner Chilcott Limited, Actavis, Inc. and Actavis Funding SCS and will be guaranteed by any subsidiary of Allergan (other than Actavis Capital) that becomes a guarantor of third party indebtedness in an aggregate principal amount exceeding $350.0 million (unless, in the case of a foreign subsidiary, such guarantee would give rise to adverse tax consequences as reasonably determined by Allergan plc). The Company is subject to, and as March 31, 2016 was in compliance with, all financial and operational covenants under the terms of the Revolving Credit Facility. At March 31, 2016, there were $900.0 million of outstanding borrowings under the Revolving Credit Facility and letters of credit outstanding were $28.8 million. The net availability under the Revolving Credit Facility was $71.2 million. The Company repaid $425.0 million of indebtedness under the Revolving Credit Facility in April 2016. Annual Debt Maturities As of March 31, 2016, annual debt maturities were as follows ($ in millions):
Amounts represent total anticipated cash payments assuming scheduled repayments.
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Other Long-Term Liabilities |
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Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Long-Term Liabilities | NOTE 14 — Other Long-Term Liabilities Other long-term liabilities consisted of the following ($ in millions):
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Income Taxes |
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Mar. 31, 2016 | |||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||
Income Taxes | NOTE 15 – Income Taxes The Company’s effective tax rate for the three months ended March 31, 2016 was 83.2% compared to 24.8% for the three months ended March 31, 2015. The effective tax rate for the three months ended March 31, 2016 was impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate and U.S. losses tax benefited at rates greater than the Irish statutory rate. Additionally, the tax benefit for the three months ended March 31, 2016 included an expense of $124.3 million for the change in a valuation allowance on a portion of U.S. capital loss carryforwards resulting from restructuring associated with the sale of the global generics business and a benefit of $32.2 million for the recognition of previously unrecognized tax benefits. The Company also recorded a $20.0 million out of period tax benefit related to the prior year during the three months ended March 31, 2016. The amount was not considered material to any of the relevant periods. The effective tax rate for the three months ended March 31, 2015 was impacted by income earned in low tax jurisdictions and U.S. losses tax benefited at rates greater than the Irish statutory rate. The increase in the effective tax rate for the period ended March 31, 2016 as compared to the period ended March 31, 2015 is the result of changes in the mix of income and losses in jurisdictions with rates other than the Irish statutory rate. The Company conducts business globally and, as a result, it files U.S. federal, state and foreign tax returns. The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for amounts it believes are in accordance with the accounting standard, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the condensed consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations with tax authorities, identification of new issues and issuance of new legislation, regulations or case law. Due to our numerous acquisitions, the Company has several concurrent audits still pending with the IRS as set forth below:
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Shareholders' Equity |
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Shareholders' Equity | NOTE 16 — Shareholders’ Equity A summary of the changes in shareholders’ equity for the three months March 31, 2016 consisted of the following ($ in millions):
Accumulated Other Comprehensive Income / (Loss) For most of the Company’s international operations, the local currency has been determined to be the functional currency. The results of its non-U.S. dollar based operations are translated to U.S. dollars at the average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transaction. Translation adjustments are reflected in shareholders’ equity and are included as a component of other comprehensive income / (loss). The effects of converting non-functional currency assets and liabilities into the functional currency are recorded as transaction gains/losses in general and administrative expenses in the consolidated statements of operations. The movements in accumulated other comprehensive income / (loss) for the three months ended March 31, 2016 were as follows ($ in millions):
The movements in accumulated other comprehensive income / (loss) for the three months ended March 31, 2015 were as follows ($ in millions):
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Derivative Instruments and Hedging Activities |
3 Months Ended |
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Mar. 31, 2016 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities | NOTE 17 — Derivative Instruments and Hedging Activities The Company’s revenue, earnings, cash flows and fair value of its assets and liabilities can be impacted by fluctuations in foreign exchange risks and interest rates, as applicable. The Company manages the impact of foreign exchange risk and interest rate movements through operational means and through the use of various financial instruments, including derivative instruments such as foreign currency derivatives. Foreign Currency Derivatives Overall, the Company is a net recipient of currencies other than the U.S. dollar and, as such, benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may negatively affect the Company’s consolidated revenues and favorably impact operating expenses in U.S. dollars. The Company enters into foreign currency derivatives to reduce current and future earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on its core business issues. Accordingly, the Company enters into various contracts which change in value as foreign exchange rates change to economically offset the effect of changes in the value of foreign currency assets and liabilities, commitments and anticipated foreign currency denominated sales and operating expenses. The Company enters into foreign currency derivatives in amounts between minimum and maximum anticipated foreign exchange exposures. The Company does not designate the current derivative instruments as accounting hedges. The Company uses foreign currency derivatives, which provide for the sale or purchase or the option to sell or purchase foreign currencies to economically hedge the currency exchange risks associated with probable but not firmly committed transactions that arise in the normal course of the Company’s business. Probable but not firmly committed transactions are comprised primarily of sales of products and purchases of raw material in currencies other than the U.S. dollar. The foreign currency derivatives are entered into to reduce the volatility of earnings generated in currencies other than the U.S. dollar. While these instruments are subject to fluctuations in value, such fluctuations are anticipated to offset changes in the value of the underlying exposures. The Company recognized realized and unrealized losses on such contracts of $14.7 million and $12.8 million during the three months ended March 31, 2016 and 2015, respectively. The fair value of outstanding foreign currency derivatives are recorded in “Prepaid expenses and other current assets” or “Investments and other assets” or “Accounts payable and accrued expenses.” At March 31, 2016 and December 31, 2015, foreign currency derivative assets associated with the foreign exchange option contracts of $16.9 million and $25.0 million, respectively, were included in “Prepaid expenses and other current assets.” At March 31, 2016 and December 31, 2015, foreign currency derivative assets associated with the foreign exchange option contracts of $42.0 million and $48.5 million, respectively, were included in “Investments and other assets.” At March 31, 2016 and December 31, 2015, there were no net foreign currency derivative liabilities associated with the foreign exchange forward contracts included in “Accounts payable and accrued expenses.” |
Fair Value Measurement |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement | NOTE 18 — Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. Fair values determined based on Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined based on Level 2 inputs utilize observable quoted prices for similar assets and liabilities in active markets and observable quoted prices for identical or similar assets in markets that are not very active. Fair values determined based on Level 3 inputs utilize unobservable inputs and include valuations of assets or liabilities for which there is little, if any, market activity. A financial asset or liability’s classification within the above hierarchy is determined based on the lowest level input that is significant to the fair value measurement. Assets and liabilities measured at fair value or disclosed at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 consisted of the following (in millions):
Marketable securities and investments consist of available-for-sale investments in U.S. treasury and agency securities and publicly traded equity securities for which market prices are readily available. Unrealized gains or losses on marketable securities and investments are recorded in accumulated other comprehensive income / (loss). Foreign Currency Contracts At March 31, 2016 and December 31, 2015, the notional principal and fair value of the Company’s outstanding foreign currency derivative financial instruments were as follows ($ in millions, except average contract rate or strike amount):
The notional principal amounts provide one measure of the transaction volume outstanding as of March 31, 2016 and December 31, 2015, and do not represent the amount of the Company’s exposure to market loss. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information as of March 31, 2016 and December 31, 2015. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments. Contingent Consideration Obligations The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs and is based on a probability-weighted income approach. The measurement is based upon unobservable inputs supported by little or no market activity based on our own assumptions. Changes in the fair value of the contingent consideration obligations, including accretion, are recorded in our consolidated statements of operations as follows ($ in millions):
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2016 and 2015 ($ in millions):
During the three months ended March 31, 2016, the following activity in contingent consideration obligations by acquisition was incurred ($ in millions):
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Business Restructuring Charges |
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Restructuring And Related Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Restructuring Charges | NOTE 19 — Business Restructuring Charges During 2016, activity related to our business restructuring and facility rationalization activities primarily related to the cost optimization initiatives in conjunction with the Allergan Acquisition. Restructuring activities for the three months ended March 31, 2016 as follows ($ in millions):
During the three months ended March 31, 2016 and 2015, the Company recognized restructuring charges of $16.1 million and $509.6 million, respectively. |
Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 20 – Commitments & Contingencies The Company and its affiliates are involved in various disputes, governmental and/or regulatory inspections, inquires, investigations and proceedings, and litigation matters that arise from time to time in the ordinary course of business. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of operations, financial condition and cash flows. The Company’s general practice is to expense legal fees as services are rendered in connection with legal matters, and to accrue for liabilities when losses are probable and reasonably estimable. The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued. As of March 31, 2016, the Company’s consolidated balance sheet includes accrued loss contingencies of approximately $335.0 million, of which approximately $125.0 million was cash settled in April of 2016, relating to the resolution with the federal government, as well as 50 states and the District of Columbia, concluding the previously disclosed federal investigation into certain sales and marketing practices involving several Warner Chilcott products during the time period January 2009 through March 2013. The Company’s legal proceedings range from cases brought by a single plaintiff to mass tort actions and class actions with thousands of putative class members. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims (including, but not limited to, qui tam actions, antitrust, product liability, breach of contract, securities, patent infringement and trade practices), some of which present novel factual allegations and/or unique legal theories. In addition, a number of the matters pending against us are at very early stages of the legal process (which in complex proceedings of the sort faced by us often extend for several years). As a result, some matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to estimate a range of possible loss. In those proceedings in which plaintiffs do request publicly quantified amounts of relief, the Company does not believe that the quantified amounts are meaningful because they are merely stated jurisdictional limits, exaggerated and/or unsupported by the evidence or applicable burdens of proof. Antitrust Litigation Actos® Litigation. On December 31, 2013 two putative class actions, on behalf of putative classes of indirect purchaser plaintiffs, were filed in the federal court for the Southern District of New York against Actavis plc and certain of its affiliates alleging that Watson Pharmaceuticals, Inc.’s (“Watson” now known as Actavis, Inc.) 2010 patent lawsuit settlement with Takeda Pharmaceutical, Co. Ltd. related to Actos ® (pioglitazone hydrochloride and metformin “Actos ® “) is unlawful. Several additional complaints have also been filed. Plaintiffs then filed a consolidated, amended complaint on May 20, 2014. The amended complaint generally alleges an overall scheme that included Watson improperly delaying the launch of its generic version of Actos ® in exchange for substantial payments from Takeda in violation of federal and state antitrust and consumer protection laws. The complaint seeks declaratory and injunctive relief and unspecified damages. Defendants have moved to dismiss the amended complaint. On September 23, 2015, the court granted the motion to dismiss the indirect purchasers’ complaint in its entirety. The indirect purchaser plaintiffs have appealed the dismissal of their complaint. In May 2015, two additional putative class action complaints, each of which makes similar allegations against the Company and Takeda, were filed by plaintiffs on behalf of a putative class of direct purchasers. Defendants have moved to dismiss the direct purchasers’ complaint. AndroGel. The Company believes that it has substantial meritorious defenses to the claims alleged. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. AndroGel® Litigation. On January 29, 2009, the U.S. Federal Trade Commission and the State of California filed a lawsuit in federal district court in California alleging that the September 2006 patent lawsuit settlement between Watson and Solvay Pharmaceuticals, Inc. (“Solvay”), related to AndroGel ® 1% (testosterone gel) CIII is unlawful. The complaint generally alleged that Watson improperly delayed its launch of a generic version of AndroGel ® in exchange for Solvay’s agreement to permit Watson to co-promote AndroGel ® for consideration in excess of the fair value of the services provided by Watson, in violation of federal and state antitrust and consumer protection laws. The complaint sought equitable relief and civil penalties. On February 2 and 3, 2009, three separate lawsuits alleging similar claims were filed in federal district court in California by various private plaintiffs purporting to represent certain classes of similarly situated claimants. On April 8, 2009, the Court transferred the government and private cases to the United States District Court for the Northern District of Georgia. The FTC and the private plaintiffs filed amended complaints on May 28, 2009. The private plaintiffs amended their complaints to include allegations concerning conduct before the U.S. Patent and Trademark Office (the “USPTO”), conduct in connection with the listing of Solvay’s patent in the FDA “Orange Book,” and sham litigation. Additional actions alleging similar claims have been filed in various courts by other private plaintiffs purporting to represent certain classes of similarly situated direct or indirect purchasers of AndroGel ® . The Judicial Panel on Multidistrict Litigation (“JPML”) transferred all federal court actions then pending outside of Georgia to that district. The district court then granted the Company’s motion to dismiss all claims except the private plaintiffs’ sham litigation claims. After the dismissal was upheld by the Eleventh Circuit Court of Appeals, the FTC petitioned the United States Supreme Court to hear the case. On June 17, 2013, the Supreme Court issued a decision, holding that the settlements between brand and generic drug companies which include a payment from the brand company to the generic competitor must be evaluated under a “rule of reason” standard of review and ordered the case remanded (the “Supreme Court AndroGel Decision”). The case is now back in the district court in Georgia. On August 5, 2014 the indirect purchaser plaintiffs filed an amended complaint which the Company answered on September 15, 2014. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Asacol® Litigation. On June 22, 2015, two class action complaints were filed in federal court in Massachusetts on behalf of a putative class of indirect purchasers. In each complaint plaintiffs allege that they paid higher prices for Warner Chilcott’s Asacol ® HD and Delzicol ® products as a result of Warner Chilcott’s alleged actions preventing or delaying generic competition in the market for Warner Chilcott’s older Asacol ® product in violation of U.S. federal antitrust laws and/or state laws. Plaintiffs seek unspecified injunctive relief, treble damages and/or attorneys’ fees. All of the actions were consolidated in the federal district court. On September 21, 2015, three additional complaints were filed on behalf of putative classes of indirect purchasers, each raising similar allegations to the complaints filed in June 2015. Defendants have moved to dismiss the indirect purchasers’ complaint. Oral argument on the motion is scheduled for May 11, 2016. On April 26, 2016, a direct purchaser, Meijer, Inc., filed a complaint in federal court in New York. The direct purchaser complaint makes similar allegations to the complaints filed by the indirect purchaser plaintiffs. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Botox® Litigation. On February 24, 2015, a class action complaint was filed in federal court in California. The complaint alleges unlawful market allocation in violation of Section 1 of the Sherman Act, 15 U.S.C. §1, agreement in restraint of trade in violation of 15 U.S.C. §1 of the Sherman Act, unlawful maintenance of monopoly market power in violation of Section 2 of the Sherman Act, 15 U.S.C. §2 of the Sherman Act, violations of California’s Cartwright Act, Section 16700 et seq. of Calif. Bus. and Prof. Code., and violations of California’s unfair competition law, Section 17200 et seq. of Calif. Bus. and Prof. Code. Plaintiffs filed an amended complaint on May 29, 2015. On June 29, 2015, the Company filed a motion to dismiss the complaint. On October 20, 2015, the Court denied the Company’s motion to dismiss the complaint. On December 18, 2015, plaintiffs filed a motion for partial judgment on the pleadings or, in the alternative, for partial summary judgment or adjudication. The Company filed a response to the motion for judgment on the pleadings on February 11, 2016. The court held oral argument on plaintiff’s motion on March 4, 2016 and took the matter under submission. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Cipro® Litigation. Beginning in July 2000, a number of suits were filed against Watson and certain Company affiliates including The Rugby Group, Inc. (“Rugby”) in various state and federal courts alleging claims under various federal and state competition and consumer protection laws. The actions generally allege that the defendants engaged in unlawful, anticompetitive conduct in connection with alleged agreements, entered into prior to Watson’s acquisition of Rugby from Sanofi Aventis (“Sanofi”), related to the development, manufacture and sale of the drug substance ciprofloxacin hydrochloride, the generic version of Bayer’s brand drug, Cipro ® . The actions generally seek declaratory judgment, damages, injunctive relief, restitution and other relief on behalf of certain purported classes of individuals and other entities. While many of these actions have been dismissed, actions remain pending in various state courts, including California, Kansas, Tennessee, and Florida. There has been activity in Tennessee and Florida since 2003. In the action pending in Kansas, plaintiffs’ motion for class certification has been fully briefed. In the action pending in the California state court, following the decision from the United States Supreme Court in the Federal Trade Commission v. Actavis matter involving AndroGel ® , described above, Plaintiffs and Bayer announced that they reached an agreement to settle the claims pending against Bayer and Bayer has now been dismissed from the action. Plaintiffs are continuing to pursue claims against the generic defendants, including Watson and Rugby. The remaining parties submitted letter briefs to the court regarding the impact of the Supreme Court AndroGel Decision and on May 7, 2015, the California Supreme Court issued a ruling, consistent with the Supreme Court AndroGel Decision discussed above, that the settlements between brand and generic drug companies which include a payment from the brand company to the generic competitor must be evaluated under a “rule of reason” standard of review. In addition to the pending actions, the Company understands that various state and federal agencies are investigating the allegations made in these actions. Sanofi has agreed to defend and indemnify Watson and its affiliates in connection with the claims and investigations arising from the conduct and agreements allegedly undertaken by Rugby and its affiliates prior to Watson’s acquisition of Rugby, and is currently controlling the defense of these actions. Doryx® Litigation. In July 2012, Mylan Pharmaceuticals Inc. (“Mylan”) filed a complaint against Warner Chilcott and Mayne Pharma International Pty. Ltd. (“Mayne”) in federal court in Pennsylvania alleging that Warner Chilcott and Mayne prevented or delayed Mylan’s generic competition to Warner Chilcott’s Doryx ® products in violation of U.S. federal antitrust laws and tortiously interfered with Mylan’s prospective economic relationships under Pennsylvania state law. In the complaint, Mylan seeks unspecified treble and punitive damages and attorneys’ fees. Following the filing of Mylan’s complaint, three putative class actions were filed against Warner Chilcott and Mayne by purported direct purchasers, and one putative class action was filed against by purported indirect purchasers. In addition, four retailers filed in the same court a civil antitrust complaint in their individual capacities against Warner Chilcott and Mayne regarding Doryx ® . In each of the class and individual cases the plaintiffs allege that they paid higher prices for Warner Chilcott’s Doryx ® products as a result of Warner Chilcott’s and Mayne’s alleged actions preventing or delaying generic competition in violation of U.S. federal antitrust laws and/or state laws. Plaintiffs seek unspecified injunctive relief, treble damages and/or attorneys’ fees. All of the actions were consolidated in the federal district court. Warner Chilcott and Mayne’s motion to dismiss was denied without prejudice by the court in June 2013. Thereafter, Warner Chilcott and Mayne reached agreements to settle the claims of the Direct Purchaser Plaintiff class representatives, the Indirect Purchaser Plaintiff class representatives and each of the individual retailer plaintiffs. Warner Chilcott and Mylan filed motions for summary judgment on March 10, 2014. On April 16, 2015, the court issued an order granting Warner Chilcott and Mayne’s motion for summary judgment, denying Mylan’s summary judgment motion and entering judgment in favor of Warner Chilcott and Mayne on all counts. Mylan is appealing the district court’s decision to the Third Circuit Court of Appeals and the appeal is fully briefed. The date for oral argument on the appeal has not yet been set. The Company intends to vigorously defend its rights in the litigations. However, it is impossible to predict with certainty the outcome of any litigation and whether any additional similar suits will be filed. Lidoderm® Litigation. On November 8, 2013, a putative class action was filed in the federal district court against Actavis, Inc. and certain of its affiliates alleging that Watson’s 2012 patent lawsuit settlement with Endo Pharmaceuticals, Inc. related to Lidoderm® (lidocaine transdermal patches, “Lidoderm®”) is unlawful. The complaint, asserted on behalf of putative classes of direct purchaser plaintiffs, generally alleges that Watson improperly delayed launching generic versions of Lidoderm® in exchange for substantial payments from Endo in violation of federal and state antitrust and consumer protection laws. The complaint seeks declaratory and injunctive relief and damages. Additional lawsuits containing similar allegations have followed on behalf of other classes of putative direct purchasers and suits have been filed on behalf of putative classes of end-payer plaintiffs. The Company anticipates additional claims or lawsuits based on the same or similar allegations may be filed. On April 3, 2014 the JPML consolidated the cases in federal district court in California. Defendants filed motions to dismiss each of the plaintiff classes’ claims. On November 17, 2014, the court issued an order granting the motion in part but denying it with respect to the claims under Section 1 of the Sherman Act. Plaintiffs then filed an amended, consolidated complaint on December 19, 2014. Defendants have responded to the amended consolidated complaint. On March 5, 2015, a group of five retailers filed a civil antitrust complaint in their individual capacities regarding Lidoderm® in the same court where it was consolidated with the direct and indirect purchaser class complaints. The retailer complaint recites similar facts and asserts similar legal claims for relief to those asserted in the related cases described above. The five retailers amended their complaint on July 27, 2015. On March 30, 2016, the U.S. Federal Trade Commission filed a lawsuit in federal district court in the Eastern District of Pennsylvania against the company, one of its Global Generics business subsidiaries, Watson Laboratories, Inc., Endo Pharmaceuticals Inc. and others arising out of patent settlements relating to Lidoderm and Opana ER (generic oxymorphone extended release tablets). The Lidoderm settlement was reached by Endo Pharmaceuticals Inc. and Watson Laboratories, Inc. in May 2012, and all allegations against the Company and Watson Laboratories, Inc. relate to the Lidoderm settlement only. The FTC action as to Watson Laboratories, Inc. parallels the allegations contained in the private litigation, and seeks monetary and equitable relief. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Loestrin® 24 Litigation. On April 5, 2013, two putative class actions were filed in the federal district court against Actavis, Inc. and certain affiliates alleging that Watson’s 2009 patent lawsuit settlement with Warner Chilcott related to Loestrin ® 24 Fe (norethindrone acetate/ethinyl estradiol tablets and ferrous fumarate tablets, “Loestrin ® 24”) is unlawful. The complaints, both asserted on behalf of putative classes of end-payors, generally allege that Watson and another generic manufacturer improperly delayed launching generic versions of Loestrin ® 24 in exchange for substantial payments from Warner Chilcott, which at the time was an unrelated company, in violation of federal and state antitrust and consumer protection laws. The complaints each seek declaratory and injunctive relief and damages. Additional complaints have been filed by different plaintiffs seeking to represent the same putative class of end-payors. In addition to the end-payor suits, two lawsuits have been filed on behalf of a class of direct payors. The Company anticipates additional claims or lawsuits based on the same or similar allegations. After a hearing on September 26, 2013, the JPML issued an order transferring all related Loestrin ® 24 cases to the federal court for the District of Rhode Island. On September 4, 2014, the court granted the defendants’ motion to dismiss the complaint. The plaintiffs appealed the district court’s decision to the First Circuit Court of Appeals and oral argument was held on December 7, 2015. On February 22, 2016 the First Circuit issued its decision vacating the decision of, and remanding the matter to, the district court. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously including in the appeal of the district court’s decision granting the Company’s motion to dismiss. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Namenda® Litigation. On September 15, 2014, the State of New York, through the Office of the Attorney General of the State of New York, filed a lawsuit in the United States District Court for the Southern District of New York alleging that Forest is acting to prevent or delay generic competition to Forest’s immediate-release product Namenda® in violation of federal and New York antitrust laws and committed other fraudulent acts in connection with its commercial plans for Namenda ® XR. In the complaint, the state seeks unspecified monetary damages and injunctive relief. On September 24, 2014, the state filed a motion for a preliminary injunction prohibiting Forest from discontinuing or otherwise limiting the availability of immediate-release Namenda® until the conclusion of the litigation. A hearing was held in November 2014 on the state’s preliminary injunction motion. On December 11, 2014, the district court issued a ruling granting the state’s injunction motion and issued an injunction on December 15, 2014. On May 22, 2015, the Court of Appeals for the Second Circuit affirmed the preliminary injunction. On June 5, 2015, Forest filed a petition with the Second Circuit for rehearing en banc which was denied. Forest and the New York Attorney General reached a settlement on November 24, 2015. On May 29, 2015, a putative class action was filed on behalf of a class of direct purchasers and on June 8, 2015 a similar putative class action was filed on behalf of a class of indirect purchasers. Since that time, additional complaints have been filed on behalf of putative classes of direct and indirect purchasers. The class action complaints make claims similar to those asserted by the New York Attorney General and also include claims that Namenda® patent litigation settlements between Forest and generic companies also violated the antitrust laws. On December 22, 2015, Forest and its co-defendants filed motions to dismiss the pending complaints of the putative classes of direct and indirect purchasers. These motions remain pending. The Company believes it has substantial meritorious defenses and intends to defend both its brand and generic defendant entities vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Zymar®/Zymaxid® Litigation. On February 16, 2012, Apotex Inc. and Apotex Corp. filed a complaint in the federal district court in Delaware against Senju Pharmaceuticals Co., Ltd. (“Senju”), Kyorin Pharmaceutical Co., Ltd. (“Kyorin”), and Allergan, Inc. (“Allergan”) alleging monopolization in violation of Section 2 of the Sherman Act, conspiracy to monopolize, and unreasonable restraint of trade in the market for gatifloxacin ophthalmic formulations, which includes Allergan’s ZYMAR ® gatifloxacin ophthalmic solution 0.3% and ZYMAXID ® gatifloxacin ophthalmic solution 0.5% products. On May 24, 2012, Allergan filed a motion to dismiss the complaint to the extent it seeks to impose liability for alleged injuries occurring prior to August 19, 2011, which is the date Apotex obtained final approval of its proposed generic product. Allergan and the other defendants also moved to dismiss. Defendants also filed a motion to stay the action pending resolution of related patent actions in the federal court in Delaware and in the U.S. Court of Appeals for the Federal Circuit. On February 7, 2013, the court granted defendants’ motion to stay the proceedings pending resolution of the appeal in the patent dispute and denied the motion to dismiss without prejudice to renew. On September 18, 2014, defendants filed a new motion to dismiss the Apotex plaintiffs’ complaint. The court dismissed Allergan’s motion on May 2, 2015. Thereafter, Allergan filed an answer to Apotex’s complaint on June 1, 2015. On June 6, 2014, a separate antitrust class action complaint was filed in the federal district court in Delaware against the same defendants as in the Apotex case. The complaint alleges that defendants unlawfully excluded or delayed generic competition in the gatifloxacin ophthalmic formulations market (generic versions of ZYMAR ® and ZYMAXID ® ). On September 18, 2014, Allergan filed a motion to dismiss for lack of subject matter jurisdiction and joined in co-defendants’ motion to dismiss for failure to state a claim. On August 19, 2015, the court granted Allergan’s motion to dismiss. On September 18, 2015, plaintiff filed a notice of appeal with the U.S. Court of Appeals for the Third Circuit. Oral argument is scheduled for June 13, 2016. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Commercial Litigation Celexa® /Lexapro® Class Actions. Forest and certain of its affiliates are defendants in three federal court actions filed on behalf of individuals who purchased Celexa ® and/or Lexapro ® for pediatric use, all of which have been consolidated for pretrial purposes in an MDL proceeding in the federal district court Massachusetts (the “Celexa ® /Lexapro ® MDL”). These actions, two of which were originally filed as putative nationwide class actions, and one of which is a putative California-wide class action, allege that Forest marketed Celexa ® and/or Lexapro ® for off-label pediatric use and paid illegal kickbacks to physicians to induce prescriptions of Celexa ® and Lexapro®. The complaints assert various similar claims, including claims under the state consumer protection statutes and state common laws. Plaintiffs in the various actions sought to have certified California, Missouri, Illinois and New York state-wide classes. However, only the Missouri state class was certified. Forest subsequently reached an agreement with the MDL plaintiffs to settle the Missouri class claims, including claims by both individuals and third party payors that purchased Celexa ® or Lexapro ® for use by a minor from 1998 to December 31, 2013, for $7.65 million with a potential to increase the amount to $10.35 million if settling plaintiffs meet certain thresholds. On September 8, 2014 the court granted final approval for the settlement. Additional actions relating to the promotion of Celexa® and/or Lexapro® have been filed all of which have been consolidated in the Celexa ® /Lexapro ® MDL. On May 3, 2013, an action was filed in federal court in California on behalf of individuals who purchased Lexapro ® for adolescent use, seeking to certify a state-wide class action in California and alleging that our promotion of Lexapro ® for adolescent depression has been deceptive. On March 5, 2014 the court granted Forest’s motion to dismiss this complaint. Plaintiff then appealed the district court’s decision to the Court of Appeals for the First Circuit and on February 20, 2015, the First Circuit affirmed the dismissal of the complaint, ruling that Plaintiffs’ California state law claims were preempted by the Federal Food, Drug, and Cosmetic Act (FDCA). On November 13, 2013, an action was filed in federal court in Minnesota seeking to certify a nationwide class of third-party payor entities that purchased Celexa ® and Lexapro ® for pediatric use. The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa ® and Lexapro ® . Forest moved to dismiss the complaint and on December 12, 2014, the court issued a ruling dismissing plaintiff’s claims under Minnesota’s Deceptive Trade Practices Act, but denying the remaining portions of the motion. A hearing on plaintiff’s motion for class certification is scheduled for May 25, 2016. On March 13, 2014, an action was filed in the federal court in Massachusetts by two third-party payors seeking to certify a nationwide class of persons and entities that purchased Celexa ® and Lexapro ® for use by pediatric use. The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, state consumer protection statutes, and state common laws, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa ® and Lexapro®. The court granted Forest’s motion to dismiss this complaint in its December 12, 2014 ruling. On August 28, 2014, an action was filed in the federal district court in Washington seeking to certify a nationwide class of consumers and subclasses of Washington and Massachusetts consumers that purchased Celexa ® and Lexapro ® for pediatric use. The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations Act, alleging that Forest engaged in off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa ® and Lexapro ® . Forest’s response to the complaint was filed on December 19, 2014. On June 16, 2015, the court issued a ruling on the motion to dismiss, granting it in part and denying it in part. Plaintiffs thereafter filed an amended complaint. Forest moved to dismiss the amended complaint. Forest and certain of its affiliates are also named as defendants in two actions filed on behalf of entities or individuals who purchased or reimbursed certain purchases of Celexa ® and Lexapro ® for pediatric use pending in the Missouri state court. These claims arise from similar allegations as those contained in the federal actions described in the preceding paragraphs. One action, filed on November 6, 2009, was brought by two entities that purchased or reimbursed certain purchases of Celexa ® and/or Lexapro ® . The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees. The other action, filed on July 22, 2009, was filed as a putative class action on behalf of a class of Missouri citizens who purchased Celexa ® for pediatric use. The complaint asserts claims under the Missouri consumer protection statute and Missouri common law, and seeks unspecified damages and attorneys’ fees. In October 2010, the court certified a class of Missouri domiciliary citizens who purchased Celexa ® for pediatric use at any time prior to the date of the class certification order, but who do not have a claim for personal injury. The Company reached agreements with both sets of plaintiffs in the Missouri actions to resolve each matter for payments that are not material to our financial condition or results of operations. The Company intends to continue to vigorously defend against these actions. At this time, the Company does not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole. Generic Drug Pricing Litigation. On March 2, 2016, a putative class action complaint was filed against Allergan plc and several other defendants in federal court in Pennsylvania on behalf of a putative class of direct and indirect purchasers of certain pharmaceutical products. Three additional indirect purchaser class action complaints were filed in the same court, two were filed on March 25, 2016 and one was filed on April 25, 2016. Each of the complaints allege that the defendants engaged in a conspiracy to fix, maintain and/or stabilize the prices of certain generic drug products. The Company intends to vigorously defend against this action. However, this action, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Telephone Consumer Protection Act Litigation. A putative class action complaint against Anda, Inc. (“Anda”), a subsidiary of the Company, was filed in Missouri state court alleging claims for conversion and alleged violations of the Telephone Consumer Protection Act (“TCPA”) and Missouri Consumer Fraud and Deceptive Business Practices Act. An amended complaint alleges that by sending unsolicited facsimile advertisements, Anda misappropriated the class members’ paper, toner, ink and employee time when they received the alleged unsolicited faxes, and that the alleged unsolicited facsimile advertisements were sent to the plaintiff in violation of the TCPA and Missouri Consumer Fraud and Deceptive Business Practices Act. The complaint seeks to assert class action claims on behalf of the plaintiff and other similarly situated third parties. On May 19, 2011, the plaintiff’s filed a motion seeking certification of a class of entities with Missouri telephone numbers who were sent Anda faxes for the period January 2004 through January 2008 but the court vacated the class certification hearing until the FCC Petition, described in more detail below, was addressed. On May 1, 2012, a separate action was filed in federal court in Florida, purportedly on behalf of the “end users of the fax numbers in the United States but outside Missouri to which faxes advertising pharmaceutical products for sale by Anda were sent.” On July 10, 2012, Anda filed its answer and affirmative defenses. The parties filed a joint motion to stay the action pending the resolution of the FCC Petition which the court granted. In addition, in October 2012, Forest and certain of its affiliates were named as defendants, in a putative class action in federal court in Missouri. This suit alleges that Forest and another defendant violated the TCPA and was filed on behalf of a proposed class that includes all persons who, from four years prior to the filing of the action, were sent telephone facsimile messages of material advertising the commercial availability of any property, goods, or services by or on behalf of defendants, which did not display an opt-out notice compliant with a certain regulation promulgated by the FCC. On July 17, 2013, the district court granted Forest’s motion to stay the action pending the administrative proceeding initiated by the pending FCC Petition and a separate petition Forest filed. On October 31, 2015, another class action complaint was filed in Missouri state court against Allergan USA, Inc., Warner Chilcott Corporation and Actavis, Inc. alleging violations of the Telephone Consumer Protection Act, the Missouri Consumer Fraud and Protection Act and conversion on behalf of a putative nationwide class of plaintiffs to who defendant Warner Chilcott Corporation sent unsolicited facsimile advertisements. Defendants removed this action to the federal district court for the Western District of Missouri on December 10, 2015 and responded to the complaint on February 8, 2016. On February 17, 2016, plaintiffs voluntarily dismissed defendants Allergan USA, Inc. and Actavis, Inc. from the litigation. In a related matter, in November 2010 Anda filed a petition with the FCC, asking the FCC to clarify the statutory basis for its regulation requiring “opt-out” language on faxes sent with express permission of the recipient (the “FCC Petition”). On May 2, 2012, the Consumer & Governmental Affairs Bureau of the FCC dismissed the FCC Petition. On May 14, 2012, Anda filed an application for review of the Bureau’s dismissal by the full Commission, requesting the FCC to vacate the dismissal and grant the relief sought in the FCC Petition. The FCC did not rule on the application for review. On June 27, 2013, Forest filed a Petition for Declaratory Ruling with the FCC requesting that the FCC find that (1) the faxes at issue in the action complied, or substantially complied with the FCC regulation, and thus did not violate it, or (2) the FCC regulation was not properly promulgated under the TCPA. On January 31, 2014, the FCC issued a Public Notice seeking comment on several other recently-filed petitions, all similar to the one Anda filed in 2010. On October 30, 2014, the FCC issued a final order on the FCC Petition granting Anda, Forest and several other petitioners a retroactive waiver of the opt-out notice requirement for all faxes sent with express consent. The litigation plaintiffs, who had filed comments on the January 2014 Public Notice, have appealed the final order to the Court of Appeals for the District of Columbia. Anda, Forest and other petitioners have moved to intervene in the appeal seeking review of that portion of the FCC final order addressing the statutory basis for the opt out/express consent portion of the regulation. Anda and Forest believe they have substantial meritorious defenses to the putative class actions brought under the TCPA, and intend to defend the actions vigorously. However, these actions, if successful, could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Prescription Drug Abuse Litigation. On May 21, 2014, the California counties Santa Clara and Orange filed a lawsuit in California state court on behalf of the State of California against several pharmaceutical manufacturers. Plaintiffs named Actavis plc in the suit. The California plaintiffs filed an amended complaint on June 9, 2014. On June 2, 2014, the City of Chicago also filed a complaint in Illinois state court against the same set of defendants, including Actavis plc, that were sued in the California Action. Co-defendants in the action removed the matter to the federal court in Illinois. Both the California and Chicago complaints allege that the manufacturer defendants engaged in a deceptive campaign to promote their products in violation of state and local laws. Each of the complaints seeks unspecified monetary damages, penalties and injunctive relief. Defendants have moved to dismiss the complaints in each action. On May 8, 2015, the court in the Chicago litigation granted the Company’s motion to dismiss the complaint. On August 26, 2015, the City of Chicago filed a second amended complaint. In the California action, on August 27, 2015, the court stayed the action based on primary jurisdiction arguments raised in the motions to dismiss. On December 15, 2015, the State of Mississippi filed a lawsuit in Mississippi state court against several pharmaceutical manufacturers. The Mississippi action parallels the allegations in the California and Chicago matters and seeks monetary and equitable relief. The Company anticipates that additional suits will be filed. The Company believes it has several meritorious defenses to the claims alleged. However, an adverse determination in these actions could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows. Testosterone Replacement Therapy Class Action. On November 24, 2014, the Company was served with a putative class action complaint filed on behalf a class of third party payers in federal court in Illinois. The suit alleges that the Company and other named pharmaceutical defendants violated various laws including the federal Racketeer Influenced and Corrupt Organizations Act and state consumer protection laws in connection with the sale and marketing of certain testosterone replacement therapy pharmaceutical products (“TRT Products”), including the Company’s Androderm ® product. This matter was filed in the TRT Products Liability MDL, described in more detail below, notwithstanding that it is not a product liability matter. Plaintiff alleges that it reimbursed third parties for dispensing TRT Products to beneficiaries of its insurance policies. Plaintiff seeks to obtain certain equitable relief, including injunctive relief and an order requiring restitution and/or disgorgement, and to recover damages and multiple damages in an unspecified amount. Defendants filed a joint motion to dismiss the complaint, after which plaintiff amended its complaint. Defendants jointly filed a motion to dismiss the amended complaint, which was granted in part and denied in part on February 3, 2016. The Court dismissed plaintiff’s substantive RICO claims for mail and wire fraud for failure to plead with particularity under Rule 9(b) but granted plaintiffs leave to replead. The court also dismissed plaintiff’s state law statutory claims and common law claims for fraud and unjust enrichment. The Court declined to dismiss plaintiff’s conspiracy claims pursuant to 18 U.S.C. § 1962(d) and its claims for negligent misrepresentation. On March 2, 2016, the defendants jointly filed a Motion for Reconsideration of the court’s ruling on plaintiff’s claims under 18 U.S.C. § 1962(d). Plaintiff filed its Third Amended Complaint on April 7, 2016. The Company believes it has substantial meritorious defenses to the claims alleged and intends to vigorously defend the action. However, an adverse determination in the case could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows. TNS Products Litigation. On March 19, 2014, a complaint was filed in the federal district court in California. The complaint alleges violations of the California Unfair Competition Law, the Consumers Legal Remedies Act, and the False Advertising Law, and deceit. On June 2, 2014, Plaintiff filed a first amended complaint. On June 23, 2014, Allergan filed a motion to dismiss the first amended complaint. On September 5, 2014, the court granted-in-part and denied-in-part Allergan’s motion to dismiss. On September 8, 2014, the court set trial for September 1, 2015. On November 4, 2014, Allergan and SkinMedica filed a motion to dismiss. On January 7, 2015, Allergan and SkinMedica’s motion to dismiss was denied. On January 15, 2015, the court set a trial date of February 16, 2016. On February 19, 2015 Plaintiff filed a third amended complaint. On May 27, 2015, the case was stayed pending the decision of the Ninth Circuit Court of Appeals in another matter involving similar legal issues. The Company believes it has substantial meritorious defenses and intends to defend itself vigorously. However, these actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. West Virginia Prescription Drug Abuse Litigation. On June 26, 2012, the State of West Virginia filed a lawsuit against multiple distributors of prescription drugs, including Anda. The complaint generally alleges that the defendants distributed prescription drugs in West Virginia in violation of state statutes, regulation and common law. The complaint seeks injunctive relief and unspecified damages and penalties. On January 3, 2014, plaintiff filed an amended complaint which the defendants moved to dismiss. On December 16, 2014, the court issued an order denying the defendants’ motion to dismiss. On January 27, 2015, the State filed a second amended complaint which the Company moved to dismiss. On September 8, 2015, the court issued a ruling denying the motion to dismiss the second amended complaint. On October 23, 2015, defendants filed a writ of prohibition in the Supreme Court of Appeals of West Virginia seeking review of the court’s denial of the motion to dismiss the second amended complaint. On January 5, 2016, the Supreme Court of Appeals of West Virginia declined to issue an order to show cause on defendants’ writ of prohibition. The case is in its preliminary stages and the Company believes it has substantial meritorious defenses to the claims alleged. However, an adverse determination in the case could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows. Xaleron Dispute. On February 5, 2016, Xaleron Pharmaceuticals, Inc. filed a lawsuit against Allergan, Inc. and Actavis, Inc. in state court in New York. The complaint, filed on February 26, 2016, alleges Allergan misappropriated Xaleron’s confidential business information and asserts claims for unfair competition, tortious interference with prospective economic advantage and unjust enrichment. The Company intends to vigorously defend against this action. However, this action, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Employment Litigation In July 2012, Forest and certain of its affiliates were named as defendants in an action brought by certain former company sales representatives and specialty sales representatives in the federal district court in New York. The action is a putative class and collective action, and alleges class claims under Title VII for gender discrimination with respect to pay and promotions, as well as discrimination on the basis of pregnancy, and a collective action claim under the Equal Pay Act. The proposed Title VII gender class includes all current and former female sales representatives employed by the Company throughout the U.S. from 2008 to the date of judgment, and the proposed Title VII pregnancy sub-class includes all current and former female sales representatives who have been, are, or will become pregnant while employed by the Company throughout the U.S. from 2008 to the date of judgment. The proposed Equal Pay Act collective action class includes current, former, and future female sales representatives who were not compensated equally to similarly-situated male employees during the applicable liability period. The Second Amended Complaint also includes non-class claims on behalf of certain of the named Plaintiffs for sexual harassment and retaliation under Title VII, and for violations of the Family and Medical Leave Act. On August 14, 2014, the court issued a decision on the Company’s motion to dismiss, granting it in part and denying it in part, striking the plaintiffs’ proposed class definition and instead limiting the proposed class to a smaller set of potential class members and dismissing certain of the individual plaintiffs’ claims. Plaintiffs filed a motion for conditional certification of an Equal Pay Act collective action on May 22, 2015 which the Company has opposed. On September 2, 2015, the court granted plaintiffs motion to conditionally certify a collective action. The litigation is still in its early stages and the parties are beginning to work on discovery matters. The Company intends to continue to vigorously defend against this action. At this time, the Company does not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole. FDA Litigation In May 2002, Company subsidiary Watson Laboratories, Inc. reached an agreement with the FDA on the terms of a consent decree with respect to its Corona, California manufacturing facility. The court approved the consent decree on May 13, 2002 ( United States of America v. Watson Laboratories, Inc., et. al ., United States District Court for the Central District of California, EDCV-02-412-VAP). The consent decree applies only to the Company’s Corona, California facility and not other manufacturing sites. The decree requires that the Corona, California facility complies with the FDA’s current Good Manufacturing Practices (“cGMP”) regulations. Pursuant to the agreement, the Company hired an independent expert to conduct inspections of the Corona facility at least once each year. In January 2016 the independent expert concluded its most recent inspection of the Corona facility. At the conclusion of the inspection, the independent expert reported its opinion to the FDA that, based on the findings of the audit of the facility, the FDA’s applicable cGMP requirements, applicable FDA regulatory guidance, and the collective knowledge, education, qualifications and experience of the expert’s auditors and reviewers, the systems at the Corona facility audited and evaluated by the expert are in compliance with the FDA’s cGMP regulations. However, the FDA is not required to accept or agree with the independent expert’s opinion. The FDA has conducted periodic inspections of the Corona facility since the entry of the consent decree, and concluded its most recent general cGMP inspection in December 2014. At the conclusion of the inspection, the FDA inspectors issued a Form 483 to the facility identifying certain observations concerning the instances where the facility failed to follow cGMP regulations. The facility promptly responded to the Form 483 observations. If in the future, the FDA determines that, with respect to its Corona facility, the Company has failed to comply with the consent decree or FDA regulations, including cGMPs, or has failed to adequately address the FDA’s inspectional observations, the consent decree allows the FDA to order a variety of actions to remedy the deficiencies. These actions could include ceasing manufacturing and related operations at the Corona facility, and recalling affected products. Such actions, if taken by the FDA, could have a material adverse effect on the Company, its results of operations, financial position and cash flows. Patent Litigation Patent Enforcement Matters Acular LS®. In September 2015, Allergan received a Paragraph IV certification notice letter from Aurobindo Pharma USA Inc. (“Aurobindo”) contending that U.S. Patent Numbers 8,008,338 (the “’338 Patent”), 8,207,215 (the “’215 Patent), 8,377,982 (the “’982 Patent”), 8,541,163 (the “’163 Patent”), 8,648,107 (the “’107 Patent”), 8,906,950 (the “’950 Patent”), and 8,946,281 (the “’281 Patent”) are invalid and not infringed by Aurobindo’s proposed generic version of Acular LS ® . While the Company intends to vigorously defend the ’338 Patent, the ’215 Patent, the ’982 Patent, the ’163 Patent, the ’107 Patent, the ’950 Patent, and the ’281 Patent and pursue its legal rights, Allergan can offer no assurance as to whether such lawsuit will be successful and that a generic version will not be launched. In November 2015, Allergan filed a complaint against Aurobindo in the U.S. District Court for the Eastern District of Texas, Marshall Division (the “Texas Litigation”) and, in the U.S. District Court for the District of Delaware (the “Delaware Litigation”). These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than March 30, 2018 (unless there is a final court decision adverse to Allergan sooner). In January 2016, Aurobindo filed a counterclaim against Allergan in the Delaware Litigation and Texas Litigation. In March 2016, the Court in the Texas Litigation entered an order scheduling the bench trial for November 1, 2017. On April 18, 2016, Allergan entered into a settlement agreement with Aurobindo in the Delaware Litigation and Texas Litigation, joint stipulations of dismissal with prejudice were filed and the Delaware Litigation and Texas Litigation cases were terminated. Amrix®. In August 2014, Aptalis Pharmatech, Inc. (“Aptalis”) and Ivax International GmbH (“Ivax”), Aptalis’s licensee for Amrix, brought an action for infringement of U.S. Patent No. 7,790,199 (the “‘199 patent”), and 7,829,121 (the “‘121 patent”) in the U.S. District Court for the District of Delaware against Apotex Inc. and Apotex Corp. (collectively “Apotex”). Apotex has notified Aptalis that it has filed an ANDA with the FDA seeking to obtain approval to market a generic version of Amrix before these patents expire. (The ‘199 and ‘121 patents expire in November 2023.) This lawsuit triggered an automatic stay of approval of Apotex’s ANDA until no earlier than December 27, 2016 (unless there is a final court decision adverse to Forest sooner, and subject to any other exclusivities, such as a first filer 180 day market exclusivity). A bench trial concluded on November 17, 2015. Post-trial briefing concluded on April 8, 2016. The Company believes it has meritorious claims to prevent the generic applicant from launching a generic version of Amrix. However, there can be no assurance a generic version will not be launched. Atelvia®. In August and October 2011 and March 2012, Warner Chilcott received Paragraph IV certification notice letters from Watson Laboratories, Inc. – Florida (together with Actavis, Inc. (formerly Watson Pharmaceuticals, Inc.) and its subsidiaries, “Actavis”), Teva and Ranbaxy Laboratories Ltd. (together with its affiliates, “Ranbaxy”) indicating that each had submitted to the FDA an ANDA seeking approval to manufacture and sell a generic version of Atelvia ® 35 mg tablets (“Atelvia ® “). The notice letters contend that Warner Chilcott’s U.S. Patent Nos. 7,645,459 (the “‘459 Patent”) and 7,645,460 (the “‘460 Patent”), two formulation and method patents expiring in January 2028, are invalid, unenforceable and/or not infringed. Warner Chilcott filed a lawsuit against Actavis in October 2011, against Teva in November 2011 and against Ranbaxy in April 2012 in the U.S. District Court for the District of New Jersey charging each with infringement of the ‘459 Patent and ‘460 Patent. On August 21, 2012, the United States Patent and Trademark Office issued to the Company U.S. Patent No. 8,246,989 (the “‘989 Patent”), a formulation patent expiring in January 2026. The Company listed the ‘989 Patent in the FDA’s Orange Book, each of Actavis, Teva and Ranbaxy amended its Paragraph IV certification notice letter to contend that the ‘989 Patent is invalid and/or not infringed, and Warner Chilcott amended its complaints against Actavis, Teva and Ranbaxy to assert the ‘989 Patent. On October 2, 2013, Actavis divested its ANDA to Amneal Pharmaceuticals. In September 2013, Warner Chilcott received a Paragraph IV certification notice letter from Impax Laboratories, Inc. indicating that it had submitted to the FDA an ANDA seeking approval to manufacture and sell a generic version of Atelvia ® . Warner Chilcott filed a lawsuit against Impax on October 23, 2013, asserting infringement of the ‘459, ‘460, and ‘989 patents. On June 13, June 30, and July 15, 2014, the Company entered into settlement agreements with Ranbaxy, Amneal and Impax, respectively. Each agreement permits Ranbaxy, Amneal and Impax to launch generic versions of Atelvia ® on July 9, 2025, or earlier in certain circumstances. Trial against Teva began on July 14, 2014 and concluded on July 18, 2014. On March 4, 2015, the District Court ruled that the claims at issue in the litigation are invalid for obviousness. The Company intends to appeal this ruling. On March 5, 2015, the Company filed a motion for entry of an injunction or stay pending appeal seeking to enjoin Teva from launching a generic version of Atelvia pending such appeal. On March 30, 2015, the District Court denied the Company’s motion for entry of an injunction or stay during the pendency of an appeal, but temporarily enjoined Teva from launching its generic product for 10 business days following entry of the order so that the Company could move before the Federal Circuit for an injunction pending appeal. On April 27, 2015, the Federal Circuit temporarily enjoined Teva from launching its generic product pending resolution of the Company’s motion for an injunction pending appeal. The Federal Circuit denied the Company’s motion on May 15, 2015, and Teva launched their generic version of Atelvia®. Appellate briefing is complete and oral argument was held on February 1, 2016. On March 18, 2016, the U.S. Court of Appeals for the Federal Circuit entered its opinion and judgment affirming the District Court’s decision. On April 25, 2016, the U.S. Court of Appeals for the Federal Circuit issued a mandate to the U.S. District Court for the District of New Jersey. Bystolic® IPR. On December 23, 2015, Forest Laboratories Holdings Limited (“Forest”) received a notification letter that an Inter Partes Review of the USPTO (“IPR”) petition was filed by Lower Drug Prices for Consumers, LLC (“LDPC”) regarding U.S. Patent No. 6,545,040, expiring on December 17, 2021 (the “’040 Patent”). LDPC filed the IPR petition on December 22, 2015, and refiled a corrected petition on January 20, 2016. Forest filed a Patent Owner’s Preliminary Response on April 22, 2016. Canasa®. In July 2013, Aptalis Pharma US, Inc. and Aptalis Pharma Canada Inc. brought actions for infringement of U.S. Patent Nos. 8,217,083 (the “‘083 patent”) and 8,436,051 (the “‘051 patent”) in the U.S. District Court for the District of New Jersey against Mylan and Sandoz. These companies have notified Aptalis that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Canasa ® before these patents expire. Amended complaints were filed against these companies in November 2013 adding claims for infringement of U.S. Patent No. 7,854,384 (the “‘384 patent”). The ‘083, ‘051, and ‘384 patents expire in June 2028. On November 11, 2015, Aptalis entered into a settlement agreement with Mylan. Under the terms of the settlement agreement, Mylan may launch its generic version of Canasa® on December 15, 2018, or earlier under certain circumstances. On March 22, 2016, Aptalis entered into a settlement agreement with Sandoz. On December 14, 2015, Aptalis brought an action for infringement of the ‘083, ‘051, and ‘384 patents in the U.S. District Court for the District of New Jersey against Pharmaceutical Sourcing Partners, Inc. (“PSP”). PSP had notified Aptalis that it had filed an ANDA with the FDA seeking to obtain approval to market generic versions of Canasa® before certain of these patents expire. This lawsuit triggered an automatic stay of approval of PSP’s ANDA that expires no earlier than May 2018 (unless a court issues a decision adverse to Aptalis sooner). On December 23 and 27, 2015, Aptalis brought actions for infringement of the ‘083, ‘051, and ‘384 patents in the U.S. District Courts for the District of New Jersey and the District of Delaware, respectively, against Delcor Asset Corp., Renaissance Pharma, Inc. and Renaissance Acquisition Holdings, LLC (“Delcor”). Delcor has notified Aptalis that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Canasa before certain of these patents expire. These lawsuits triggered an automatic stay of approval of Delcor’s ANDA that expires no earlier than May 2018 (unless there is a final court decision adverse to Aptalis sooner). On March 14, 2016, Aptalis filed a motion to dismiss PSP’s Seventh and Eighth counterclaims or in the alternative, to bifurcate the trial and stay discovery relating to PSP’s seventh and eighth counterclaims. Trial is scheduled for November 2017 in the PSP action. On April 8, 2016, Aptalis entered into a settlement agreement with Delcor. The Company believes it has meritorious claims to prevent the generic applicants from launching a generic version of Canasa ®. However, there can be no assurance a generic version will not be launched. Combigan® II. In 2012, Allergan filed a complaint against Sandoz, Alcon, Apotex and Watson in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging that their proposed products infringe U.S. Patent Number 8,133,890 (“890 Patent”), and subsequently amended their complaint to assert infringement of U.S. Patent Number 8,354,409. In March 2013, Allergan received a Paragraph IV invalidity and non-infringement certification from Sandoz, contending that the ‘890 Patent is invalid and not infringed by the proposed generic product. In October 2013, Allergan filed a motion to stay and administratively close the Combigan II matter, which was granted. In April 2015, Allergan filed a stipulation of dismissal and the U.S. District Court granted the Order with respect to the Watson defendants. In October 2015, the U.S. District Court entered an order consolidating the Combigan® III matter C.A. 2:15-cv-00347-JRG into this matter C.A. 2:12-cv-00207-JRG, as lead case and subsequently, set the bench trial for October 25, 2016. A Markman Hearing was held on March 2, 2016. While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched. Combigan® III. On January 26, 2015, Allergan received a Paragraph IV letter from Sandoz contending that U.S. Patent Numbers 7,030,149, 7,320,976, 7,642,258, and 8,748,425 are invalid and not infringed by the proposed generic product. In March 2015, Allergan filed a complaint against Sandoz in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging that their proposed products infringe U.S. Patent Numbers 7,030,149, 7,320,976, 7,642,258, and 8,748,425 (the “Combigan Patents”). In April 2015, Sandoz filed a counterclaim against Allergan. In August 2015, Allergan filed a motion for consolidation with C.A. 2:12-cv-00207-JRG and request for earlier trial date. In October 2015, the U.S. District Court held oral argument on the motion for consolidation and earlier trial date and entered an order consolidating this matter C.A. 2:15-cv-00347-JRG into the Combigan® II matter C.A. 2:12-cv-00207-JRG and subsequently, set the bench trial for October 25, 2016. A Markman Hearing was held on March 2, 2016. While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched. Delzicol®. On August 28, 2015, Warner Chilcott Company, LLC, Warner Chilcott (US), LLC, and Qualicaps Co., Ltd. (collectively, “Plaintiffs”) brought an action for infringement of U.S. Patent No. 6,649,180 (the “‘180 patent”) in the United States District Court for the Eastern District of Texas against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. (collectively, “Teva”). Teva notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol® before the ‘180 patent expires in April 2020. This lawsuit triggered an automatic stay of approval of Teva’s ANDA that expires no earlier than January 2018 (unless there is a final court decision adverse to Plaintiffs sooner). Trial is scheduled for October 2017. On November 9, 2015, Plaintiffs also brought an action for infringement of ‘180 patent in the United States District Court for the Eastern District of Texas against Mylan Pharmaceuticals, Inc., Mylan Laboratories Limited and Mylan, Inc. (collectively, “Mylan”). Mylan notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol® before the ‘180 patent expires in April 2020. This lawsuit triggered an automatic stay of approval of Mylan’s ANDA that expires no earlier than March 2018 (unless a court issues a decision adverse to Plaintiffs sooner). On December 16, 2015, Mylan filed a motion to dismiss for failure to state a claim, lack of personal jurisdiction, and improper venue, which remains pending. Trial is scheduled for October 2017. In March 2016, the Court entered an order consolidating the Mylan litigation (C.A. 2:15-cv-01740) with the Teva litigation (C.A. 2:15-cv-01471) matter as the lead case. In February 2016, Warner Chilcott received a Paragraph IV letter from Zydus notifying Warner Chilcott that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol® before the patent expires in April 2020, contending that U.S. Patent Number 6,649,180 (the “’180 patent”) is invalid and not infringed by the proposed generic product. On April 1, 2016, Warner Chilcott Company, LLC, Warner Chilcott (US), LLC, and Qualicaps Co., Ltd. (collectively, “Plaintiffs”) brought an action for infringement of U.S. Patent No. 6,649,180 (the “‘180 patent”) in the United States District Court for the Eastern District of Texas against Cadila Healthcare Ltd., Zydus International Pvt. Ltd., Zydus Pharmaceuticals (USA) Inc. (collectively, “Zydus”). While the Company intends to vigorously defend the patent at issue in these litigations, Warner Chilcott can offer no assurance as to whether the lawsuits will be successful and that a generic version will not be launched. Gelnique® 10% gel. In October 2015, Actavis Laboratories, UT, Inc. (“Actavis”) filed a complaint in the U.S. District Court for the District of Delaware for infringement of U.S. Patent Nos. 7,029,694 (“’694 Patent”), 7,179,483 (“’483 Patent”), 8,241,662 (“’662 Patent”), and 8,920,392 (“’392 Patent”) against Par Pharmaceutical, Inc. (“Par”). Par notified Plaintiff that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Gelnique® 10% gel before the ’694 Patent, ’483 Patent, ’662 Patent, and the ’392 Patent expires. The ’694, ’483, and ’662 Patents expire in April 2020, and the ’392 Patent expires in March 2031. This lawsuit triggered an automatic stay of approval of Par’s ANDA that expires no earlier than February 19, 2018 (unless there is a final court decision adverse to Plaintiff sooner). Lastacaft®. In October 2014, Allergan and Vistakon Pharmaceuticals, LLC (“Vistakon”) filed a complaint in the U.S. District Court for the District of Delaware for infringement of U.S. Patent No. 8,664,215 (“’215 Patent”) against Wilshire Pharmaceuticals, Inc. (“Wilshire”). In February 2015, Wilshire filed a motion to dismiss Count II of the complaint for lack of subject matter jurisdiction and a counterclaim against Allergan and Vistakon. The parties stipulated and the Court ordered that Count II is dismissed without prejudice. In June 2015, the Court scheduled a bench trial for July 17, 2017. This lawsuit triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than January 28, 2018 (unless there is a final court decision adverse to Allergan sooner). While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched. Latisse® III. In December 2014, Allergan and Duke University filed a complaint for declaratory judgment of infringement of U.S. Patent Nos. 8,906,962 (“‘962 Patent”) against Apotex. In January 2015, Allergan and Duke subsequently filed an amended complaint against Apotex to assert infringement of U.S. Patent Number 8,926,953 (“‘953 Patent”). In March 2015, Allergan and Duke filed a second amended complaint asserting only the ‘953 Patent. Apotex filed a motion to dismiss for failure to state a claim with respect to the ‘953 Patent. In February 2016, Allergan received a Paragraph IV letter from Sandoz notifying Allergan that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Latisse® before the patents expire in January 2023, contending that U.S. Patent Numbers 9,216,183 (the “’183 patent”) and 9,226,931 (the “’931 patent) are invalid and not infringed by the proposed generic product. In December 2014, Allergan and Duke filed a complaint for infringement of U.S. Patent No. 8,906,962 (“‘962 Patent”) against Sandoz, Inc. (“Sandoz”), Akorn, Inc. (“Akorn”), Hi-Tech Pharmacal Co., Inc. (“Hi-Tech”), and Actavis, Inc., Watson Laboratories, Inc., and Actavis Pharma, Inc. (collectively, “Actavis”). In January 2015, Allergan and Duke subsequently filed an amended complaint against Sandoz, Akorn, Hi-Tech, and Actavis to assert infringement of U.S. Patent Number 8,926,953 (“‘953 Patent”). In March 2015, Allergan filed a notice of voluntary dismissal as to the Actavis defendants. In March 2015, Allergan and Duke filed a motion for leave to file a second amended complaint asserting only the ‘953 Patent. In April 2015, Sandoz filed a motion to dismiss for failure to state a claim. In May 2015, Akorn and Hi-Tech filed a motion to dismiss for failure to state a claim. On May 19, 2015, the court entered an opinion and order granting Allergan and Duke’s motion for leave to file a second amended complaint, which will render moot Apotex’s motion to dismiss for failure to state a claim, Allergan and Duke’s motion to dismiss Apotex’s counterclaims, Sandoz’s motion to dismiss for failure to state a claim, and Akorn and Hi-Tech’s motion to dismiss for failure to state a claim. On May 22, 2015, Allergan and Duke filed a second amended complaint. On June 22, 2015, Apotex and Sandoz filed separate motions to dismiss for failure to state a claim. On July 2, 2015, Akorn and Hi-Tech filed a motion for judgment on the pleadings. On August 31, 2015, the court issued an order and judgment dismissing the case with prejudice in favor of Apotex, Sandoz and Akorn on all of Allergan’s claims alleging infringement of the ‘953 patent. In the Sandoz and Akorn matters, the court also declared and adjudged the ‘953 patent invalid as obvious, and collaterally estopped Allergan from asserting the ‘953 patent against Sandoz or Akorn or contesting the invalidity of the ‘953 patent. In late September, the court entered a final judgment that declared and adjudged claims 8, 23 and 26 of the ‘953 patent invalid as obvious and collaterally estopped Allergan from asserting claims 8, 23 and 26 of the ‘953 patent against Apotex and Akorn or contesting the invalidity of claims 8, 23 and 26 of the ‘953 patent. On September 30, 2015, Allergan filed a Notice of Appeal to the Court of Appeals for the Federal Circuit. On October 19, 2015, the U.S. Court of Appeals for the Federal Circuit docketed the appeal filed by Allergan. In March 2016, Allergan filed its opening brief. While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched. Minastrin® 24 Fe. On June 6, 2014, Warner Chilcott sued Lupin Atlantis Holdings SA, Lupin Ltd. and Lupin Pharmaceuticals, Inc. (collectively, “Lupin”) in the United States District Court for the District of Maryland, alleging that sales of Lupin’s norethindrone and ethinyl estradiol chewable tablets, a generic version of Warner Chilcott’s Minastrin ® 24 Fe, would infringe U.S. Patent 6,667,050 (the “‘050 patent”). The Complaint seeks an injunction. Pursuant to the provisions of the Hatch-Waxman Act, the FDA is precluded from granting final approval to the generic applicants until the earlier of thirty months after the generic applicant provided Warner Chilcott with notice of its abbreviated new drug application filing or the generic applicant prevails in the pending litigation. Warner Chilcott further notes that FDA will not approve any ANDA product before May 8, 2016 due to Minastrin ® 24 Fe’s new dosage form exclusivity, which expires on that date. The litigation against Lupin is pending. Warner Chilcott notes that on April 29, 2014, several of the claims of the ‘050 patent were declared invalid in the Generess litigation discussed above. Warner Chilcott has appealed the Generess decision and the appeal is currently pending. Lupin and the Company have entered into a settlement agreement and have moved the District Court in the Generess matter for an indicative ruling that it would vacate the decision in Generess if the pending appeal in that case is remanded. On April 8, 2015, the District Court granted the parties’ motion and the Generess appeal has been terminated. The parties request that the District Court in Generess vacate its prior opinion was granted on May 18, 2015. This case was dismissed on May 18, 2015. By letter dated April 15, 2015, the Company received a Paragraph IV notice letter from Amneal Pharmaceuticals LLC (“Amneal”). A complaint against Amneal was filed on May 28, 2015 in the United States District Court for the District of New Jersey. The Company settled its litigation with Amneal and the case was dismissed on January 2016. The Company is also involved in ANDA litigation with Mylan Pharmaceuticals, Inc. ,(“Mylan”) and Jai Pharma Limited, (“Jai”) regarding their Paragraph IV challenge to the ‘050 patent. The Company settled its litigation with Mylan and Jai and the case was dismissed on April 27, 2016. Namenda XR®. Between January and October 2014, Forest Laboratories, Inc., Forest Laboratories Holdings, Ltd. (collectively, “Forest”) and Merz Pharma and Adamas Pharmaceuticals, Forest’s licensors for Namenda XR® (all collectively, “Plaintiffs”), brought actions for infringement of some or all of U.S. Patent Nos. 5,061,703 (the “‘703 patent”), 8,039,009 (the “’009 patent”), 8,168,209 (the “‘209 patent”), 8,173,708 (the “‘708 patent”), 8,283,379 (the “‘379 patent”), 8,329,752 (the “‘752 patent”), 8,362,085 (the “‘085 patent”), and 8,598,233 (the “‘233 patent”) in the U.S. District Court for the District of Delaware against Wockhardt, Teva, Sun, Apotex, Anchen, Zydus, Watson, Par, Mylan, Amneal, Ranbaxy, and Amerigen, and related subsidiaries and affiliates thereof. These companies have notified Plaintiffs that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namenda XR® before these certain patents expire. Including a 6-month pediatric extension of regulatory exclusivity, the ‘703 patent expires in October 2015, the ‘009 patent expires in September 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents expire in May 2026. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than June 2016 (unless there is a final court decision adverse to Plaintiffs sooner). On June 11, 2014, Mylan filed a motion to dismiss for lack of personal jurisdiction, which the district court denied on March 30, 2015. On December 18, 2014, Ranbaxy filed an IPR before the Patent Trial and Appeal Board, U.S. Patent and Trademark Office, with respect to the ‘085 patent. Adamas filed a preliminary response on April 14, 2015. On May 1, 2015, Forest entered into a settlement agreement with Ranbaxy. On May 15, 2015, the Patent Trial and Appeal Board granted Adamas and Ranbaxy’s joint motion to terminate the case. On October 17, 2014, Forest and Actavis Laboratories FL, Inc. (f/k/a Watson Laboratories, Inc. — Florida) filed a stipulation dismissing their respective claims without prejudice. On November 3, 2014, Plaintiffs entered into a settlement agreement with Wockhardt. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Wockhardt that will permit it to launch its generic version of Namenda XR® as of the date that is the later of (a) two (2) calendar months prior to the expiration date of the last to expire of the ‘703 patent, the ‘209 patent, the ‘708 patent, the ‘379 patent, the ‘752 patent, the ‘085 patent, and the ‘233 patent, including any extensions and/or pediatric exclusivities; or (b) the date that Wockhardt obtains final FDA approval of its ANDA, or earlier in certain circumstances. On January 13, 2015, Plaintiffs entered into settlement agreements with Anchen and Par. Under the terms of the settlement agreements, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide licenses to Anchen and Par that will permit them to launch their generic versions of Namenda XR® as of the date that is the later of (a) two (2) calendar months prior to the expiration date of the last to expire of the ‘209 patent, the ‘708 patent, the ‘379 patent, the ‘752 patent, the ‘085 patent, and the ‘233 patent, as well as the ‘009 patent for Par only, including any extensions and/or pediatric exclusivities; or (b) the dates that Anchen and Par obtain final FDA approval of their respective ANDAs, or earlier in certain circumstances. On May 11, 2015, Forest entered into a settlement agreement with Sun. On August 18, 2015, Forest entered into a settlement agreement with Zydus. On September 9, 2015, Forest entered into a settlement agreement with Amneal. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Amneal that will permit it to launch its generic version of Namenda XR® beginning January 31, 2020, following receipt by Amneal of final approval from the FDA on its ANDA for generic Namenda XR®; or (b) under certain circumstances, Amneal has an option to launch an authorized generic version of Namenda XR® beginning on January 31, 2021. The Company entered into a settlement agreement with Amerigen on October 20, 2015. The Company entered into a settlement agreement with Mylan on November 16, 2015. The Company entered into a settlement agreement with Lupin on December 22, 2015. On January 5, 2016, the district court issued a claim construction ruling that included findings of indefiniteness as to certain claim terms in the asserted patents. On February 11, 2016, the Company settled with Apotex. Trial began on February 16, 2016 with the remaining defendant Teva with respect to the ‘009 patent. Post-trial briefing concluded on April 29, 2016. The Parties have reached agreement on settlement with Teva subject to Court approval. On October 9, 2015, the Company also brought an action for infringement of the ‘009, ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents in the U.S. District Court for the District of Delaware against Accord Healthcare, Inc. and Intas Pharmaceuticals Limited (collectively, “Accord”). The Accord defendants have notified Plaintiffs that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namenda XR® before these patents expire. On January 14, 2016, Forest entered into a settlement agreement with Accord. On December 18, 2015, the Company also brought an action for infringement of the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents in the U.S. District Court for the District of Delaware against Panacea Biotec, Ltd. (“Panacea”). Panacea has notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namenda XR® before these patents expire. This lawsuit triggered an automatic stay of approval of Panacea’s ANDA that expires no earlier than May 2018 (unless a court issues a decision adverse to Plaintiffs sooner). The Company believes it has meritorious claims to prevent the generic applicants from launching a generic version of Namenda XR®. However, there can be no assurance a generic version will not be launched. Namzaric™. On August 27, 2015, Forest Laboratories, LLC, Forest Laboratories Holdings, Ltd. (collectively, “Forest”) and Adamas Pharmaceuticals, Inc. (all collectively, “Plaintiffs”), brought an action for infringement of some or all of U.S. Patent Nos. 8,039,009 (the “’009 patent”), 8,058,291 (the “‘291 patent”), 8,168,209 (the “‘209 patent”), 8,173,708 (the “‘708 patent”), 8,283,379 (the “‘379 patent”), 8,293,794 (the “‘794 patent”), 8,329,752 (the “‘752 patent”), 8,338,485 (the “‘485 patent”), 8,338,486 (the “‘486 patent”), 8,362,085 (the “‘085 patent”), 8,580,858 (the “‘858 patent”) and 8,598,233 (the “‘233 patent”) in the U.S. District Court for the District of Delaware against Amneal Pharmaceuticals LLC and Par Pharmaceutical, Inc., and related subsidiaries and affiliates thereof. These companies have notified Plaintiffs that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namzaric™ before these certain patents expire. Including a 6-month pediatric extension of regulatory exclusivity, the ‘009 patent expires in September 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents expire in May 2026. The ‘291 patent expires in December 2029, and the ‘794, ‘485, ‘486, and ‘858 patents expire in November 2025. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than January 2018 (unless there is a final court decision adverse to Plaintiffs sooner). On October 23, 2015, the Company also brought an action for infringement of the ‘009, ‘291, ‘209, ‘708, ‘379, ‘794, ‘752, ‘485, ‘486, ‘085, ‘858 and ‘233 patents in the U.S. District Court for the District of Delaware against Amerigen Pharmaceuticals, Inc. and Amerigen Pharmaceuticals Ltd. (collectively, “Amerigen”). The Amerigen defendants have notified Plaintiffs that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namzaric™ before these certain patents expire. On January 5, 2016, the district court in the Namenda XR® patent litigations issued a claim construction ruling that included findings of indefiniteness as to certain claim terms in certain of the patents also asserted in the pending Namzaric™ patent litigations. The Company entered into a settlement agreement with Par on April 29, 2016. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Par that will permit it to launch its generic version of Namzaric® as of June 5, 2029, or earlier in certain circumstances. Trial is scheduled for October 2017. While the Company intends to vigorously defend the patents at issue in this litigation, Forest can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched. Rapaflo®. On June 17, 2013, Actavis, Inc., Watson Laboratories, Inc., (collectively, “Actavis”) and Kissei Pharmaceutical Co., Ltd. (“Kissei”) sued Hetero USA Inc., Hetero Labs Limited, and Hetero Labs Limited, Unit 3 (collectively, “Hetero”) in the United States District Court for the District of Delaware, alleging that sales of silodosin tablets, a generic version of Actavis’ Rapaflo ® tablets, would infringe U.S. Patent No. 5,387,603 (the “‘603 patent”). On June 17, 2013 Actavis and Kissei sued Sandoz Inc. (“Sandoz”) in the United States District Court for the District of Delaware, alleging that sales of Sandoz’s generic version of Rapaflo ® would infringe the ‘603 patent. The complaint seeks injunctive relief. On December 22, 2014 the Parties completed a settlement agreement with Hetero. Actavis and Kissei’s lawsuit against Sandoz have been consolidated and remain pending. Pursuant to the provisions of the Hatch-Waxman Act, the FDA is precluded from granting final approval to the generic applicants prior to April 8, 2016. The Company believes it has meritorious claims to prevent the generic applicants from launching a generic version of Rapaflo®. However, if a generic applicant prevails in the pending litigation or launches a generic version of Rapaflo® before the pending litigation is finally resolved, it could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows. Restasis®. Between August and September 2015, Allergan brought actions for infringement of U.S. Patent Nos. 8,629,111 (the “‘111 patent”), 8,633,162 (the “‘162 patent”), 8,642,556 (the “‘556 patent”), 8,648,048 (the “‘048 patent”), and 8,685,930 (the “‘930 patent”) in the U.S. District Court for the Eastern District of Texas against Akorn, Inc, Apotex, Inc., Mylan Pharmaceuticals, Inc., Teva Pharmaceuticals USA, Inc., InnoPharma, Inc., and Pfizer, Inc., and related subsidiaries and affiliates thereof. On September 14, 2015, Allergan brought an action for infringement of these patents in the U.S. District Court for the District of Delaware against InnoPharma, Inc. and Pfizer, Inc. These companies have notified Allergan that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Restasis® before these patents expire in August 2024. In the Texas actions the District Court granted joint motions to dismiss without prejudice Teva Pharmaceutical Industries Ltd. and Pfizer, Inc., on October 12 and October 22, 2015, respectively. Teva Pharmaceuticals USA, Inc. (“Teva”) and InnoPharma, Inc. (“InnoPharma”) remain defendants in the respective actions. In October 2015, Mylan Pharmaceuticals, Inc. and Mylan, Inc. (“Mylan”) filed a motion to dismiss for lack of personal jurisdiction and improper venue, and for failure to state a claim as to Mylan, Inc.; Teva filed a motion to dismiss for lack of personal jurisdiction and improper venue; Apotex, Inc. and Apotex Corp. (“Apotex”) filed an answer, affirmative defenses and counterclaim; Akorn, Inc. (“Akorn”) filed an answer and counterclaim; and Teva filed an answer, counterclaim and motion to dismiss. Allergan entered into a settlement agreement with Apotex on December 15, 2015. In December 2015, Allergan and Apotex filed a joint stipulation of dismissal and the U.S. District Court granted the Order with respect to the Apotex defendants. In January 2016, the Court scheduled a bench trial for August 29, 2017. While the Company intends to vigorously defend the patents at issue in this litigation, Allergan can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched. In February 2016, Allergan filed an amended complaint to include U.S. Patent Number 9,248,191 (the “’191 patent”). In February and March 2016, Allergan received Paragraph IV letters from Apotex, Mylan and Teva notifying Allergan that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Restasis® before the patents expire in August 2024, contending that the ‘191 patent is invalid and not infringed by their respective proposed generic products. On March 1, 2016, Allergan received a Paragraph IV letter from Famy Care Limited (“Famy Care”) notifying Allergan that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Restasis® before the patents expire in August 2024, contending that the ‘111 patent, the ʼ162 patent, the ‘556 patent, the ‘048 patent, the ‘930 patent, and the ‘191 patent are invalid and not infringed by their respective proposed generic products. In March 2016, the Court entered an order requesting supplemental briefs on the effect of the Federal Circuit’s Acorda decision (No. 2014-1456) on Teva’s and Mylan’s pending motions to dismiss. In their supplemental briefs, Teva acknowledged that, under the Acorda decision, it is subject to specific personal jurisdiction in the Eastern District of Texas and that venue is proper, and Mylan requested that the District Court refrain from taking action on its pending motion until after Mylan has sought panel and en banc rehearing in the Acorda action. In April 2016, the Court issued a memorandum and opinion denying Mylan’s and Teva’s motions to dismiss. On April 12, 2016, Allergan filed a complaint for infringement of the ʼ111 patent, ʼ162 patent, ʼ556 patent, ʼ048 patent, ʼ930 patent, and the ʼ191 patent in the U.S. District Court for the Eastern District of Texas against Famy Care. Saphris®. Between September 2014 and May 2015, Forest Laboratories, LLC, and Forest Laboratories Holdings, Ltd. (collectively, “Forest”) brought actions for infringement of some or all of U.S. Patent Nos. 5,763,476 (the “‘476 patent”), 7,741,358 (the “‘358 patent”) and 8,022,228 (the “‘228 patent”) in the U.S. District Court for the District of Delaware against Sigmapharm Laboratories, LLC, Hikma Pharmaceuticals, LLC, Breckenridge Pharmaceutical, Inc., Alembic Pharmaceuticals, Ltd. and Amneal Pharmaceuticals, LLC, and related subsidiaries and affiliates thereof. Including a 6-month pediatric extension of regulatory exclusivity, the ‘476 patent expires in December 2020, and the ‘358 and ‘228 patents expire in October 2026. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than February 13, 2017 (unless a court issues a decision adverse to Forest sooner). On February 3, 2015, the District Court consolidated the then-pending actions for all purposes. On September 30, 2015, the District Court consolidated all pending actions. On March 28, 2016, the Court entered Forest and Hikma’s proposed joint stipulation and order of adverse judgment and dismissal of claims related to the ‘358 and ‘228 patents. In April 2016, the Court granted the proposed consent judgment of non-infringement and order of dismissal of counterclaims related to the ‘358 and ‘228 patents, as well as a stipulation and order with respect to infringement of Claims 1, 2, and 6 of the ʼ476 patent, between Plaintiffs and Breckenridge. The Court also granted the proposed stipulation of entry and proposed order of adverse judgment and dismissal of counterclaims related to the ʼ358 and ʼ228 patents between Plaintiffs and Sigmapharm. Trial is scheduled to begin in August 2016 with respect to the ‘476 patent, the only remaining patent-in-suit. The Company believes it has meritorious claims to prevent the generic applicants from launching a generic version of Saphris®. However, there can be no assurance a generic version will not be launched. Savella®. Between September 2013 and February 2014, Forest Laboratories, Inc., Forest Laboratories Holdings, Ltd. (collectively, “Forest”) and Royalty Pharma Collection Trust (“Royalty”), Forest’s licensor for Savella®, brought actions for infringement of U.S. Patent Nos. 6,602,911 (the “‘911 patent”), 7,888,342 (the “‘342 patent”), and 7,994,220 (the “‘220 patent”) in the U.S. District Court for the District of Delaware against Amneal, Apotex, First Time US Generics, Glenmark, Hetero, Lupin, Mylan, Par, Ranbaxy, and Sandoz, and related subsidiaries and affiliates thereof. These companies have notified Forest and Royalty that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Savella before these patents expire. (The ‘342 patent expires in November 2021, the ‘911 patent expires in January 2023, and the ‘220 patent expires in September 2029.) These lawsuits triggered an automatic stay of approval of the applicable ANDAs until July 14, 2016 (unless a court issues a decision adverse to Forest and Royalty Pharma sooner). On March 7, 2014, Forest and Royalty voluntarily dismissed, without prejudice, all claims against Sandoz. On March 20, 2014, the district court consolidated all of the remaining pending actions for all purposes and issued a scheduling order setting a trial date in January 2016. On May 12, 2014, Forest and Royalty entered into a settlement agreement with First Time US Generics. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Forest will provide a license to First Time that will permit it to launch its generic version of Savella® as of the date that is the later of (a) six (6) calendar months prior to the expiration date of the last to expire of the ‘911 patent, the ‘342 patent, and the ‘220 patent, including any extensions and/or pediatric exclusivities; or (b) the date that First Time obtains final FDA approval of its ANDA, or earlier in certain circumstances. On December 15, 2014, Forest and Royalty entered into a settlement agreement with Ranbaxy. On April 8, 2015, Defendants filed a motion to dismiss for lack of standing. On or about April 29, 2015, Forest entered into a settlement agreement with Par that will permit Par to launch its generic version of Savella® as of the date that is the later of (a) six (6) calendar months prior to the expiration date of the last to expire of the ‘911 patent, the ‘342 patent, and the ‘220 patent, including any extensions and/or pediatric exclusivities; or (b) the date that Par obtains final FDA approval of its ANDA, or earlier in certain circumstances. On December 11, 2015, Forest and Royalty entered into settlement agreements with Hetero and Glenmark. On January 8, 2016, Forest and Royalty entered into a settlement agreement with Amneal. On January 19, 2016, Forest and Royalty entered into a settlement agreement with Apotex. The defendants under these agreements may enter the market as of March 19, 2026. A bench trial concluded on January 26, 2016. Post-trial briefing concluded on April 26, 2016. The Company believes it has meritorious claims to prevent the remaining generic applicants from launching a generic version of Savella®. However, there can be no assurance a generic version will not be launched. Teflaro®. In January 2015, Forest Laboratories, LLC, Forest Laboratories Holdings, Ltd., and Cerexa, Inc. (collectively, “Forest”) and Takeda Pharmaceutical Company Limited (“Takeda”), Forest’s licensor for Teflaro®, brought an action for infringement of some or all of U.S. Patent Nos. 6,417,175 (the “‘175 patent”), 6,906,055 (the “‘055 patent”), 7,419,973 (the “‘973 patent”) and 8,247,400 (the “‘400 patent”) in the U.S. District Court for the District of Delaware against Apotex and Sandoz, and related subsidiaries and affiliates thereof. These companies have notified Forest and Takeda that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Teflaro® before some or all of the ‘175, ‘055, ‘973 and ‘400 patents expire. (The ‘175 patent expires in April 2022, the ‘055 and ‘973 patents expire in December 2021, and the ‘400 patent expires in February 2031.) These lawsuits triggered an automatic stay of approval of the applicable ANDAs until April 29, 2018 (unless a court issues a decision adverse to Forest and Takeda sooner). On June 24, 2015, the District Court issued a scheduling order setting a trial date in June 2017. In April 2016, Forest filed a complaint for infringement of the ʼ175 patent in the U.S. District Court for the District of Delaware against Apotex. Apotex had notified Forest and Takeda that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Teflaro® before the ʼ175 patent expires in April 2022. This lawsuit triggered an automatic stay of approval of the applicable ANDA with respect to the ’175 patent until September 8, 2018 (unless a court issues a decision adverse to Forest and Takeda sooner). While the company intends to vigorously defend the patents at issue in this litigation, Forest can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched. Viibryd®. In March 2015, Forest Laboratories, LLC, Forest Laboratories Holdings, Ltd., (collectively, “Forest”) and Merck KGaA and Merck Patent Gesellschaft Mit Beschränkter Haftung (collectively, “Merck”), Forest’s licensor for Viibryd, brought actions for infringement of U.S. Patent Nos. 7,834,020 (the “‘020 patent”), 8,193,195 (the “‘195 patent”), 8,236,804 (the “‘804 patent”) and 8,673,921 (the “‘921 patent”) in the U.S. District Court for the District of Delaware against Accord Healthcare Inc. (“Accord”), Alembic Pharmaceuticals, Ltd. (“Alembic”), Apotex, Inc. (“Apotex”), InvaGen Pharmaceuticals, Inc. (“InvaGen”), and Teva Pharmaceuticals USA, Inc. (“Teva”), and related subsidiaries and affiliates thereof. These companies have notified Forest and/or Merck that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Viibryd before the ‘020, ‘195, ‘804 and ‘921 patents expire in June 2022. These lawsuits triggered an automatic stay of approval of the applicable ANDAs until July 21, 2018 (unless a court issues a decision adverse to Forest and Merck sooner). On August 24, 2015, the District Court consolidated the actions for all purposes and issued a scheduling order setting a trial date in January 2018. On November 23, 2015, Forest and Merck brought an action for infringement of the ‘020, ‘195, ‘804 and ‘921 patents in the U.S. District Court for the District of Delaware against InvaGen, which matter was consolidated with the earlier-filed action against InvaGen. While the Company intends to vigorously defend the patents at issue in this litigation, Forest can offer no assurance as to whether the lawsuit will be successful and that a generic version will not be launched. Patent Defense Matters Bayer Patent Litigation. In August 2012, Bayer Pharma AG (together with its affiliates, “Bayer”) filed a complaint against Warner Chilcott in the U.S. District Court for the District of Delaware alleging that Warner Chilcott’s manufacture, use, offer for sale, and/or sale of its Lo Loestrin ® Fe oral contraceptive product infringes Bayer’s U.S. Patent No. 5,980,940. In the complaint, Bayer seeks injunctive relief and unspecified monetary damages for the alleged infringement. In December 2012, Bayer amended the complaint to add a patent interference claim seeking to invalidate the Company’s ‘984 Patent, which covers the Lo Loestrin ® Fe product. On December 15, 2014, Warner Chilcott filed a Summary Judgment motion seeking dismissal of the case. On April 21, 2015, the District Court granted Warner Chilcott’s motion and held the ‘940 patent invalid for indefiniteness. On June 5, 2015, Bayer filed a notice of appeal. Briefing is complete. The U.S. Court of Appeals for the Federal Circuit heard oral argument on April 5, 2016. On April 12, 2016, the U.S. Court of Appeals for the Federal Circuit issued an opinion and judgment affirming the District Court’s decision, in favor of Warner Chilcott. Oxymorphone Extended-Release Tablets (Generic version of Opana® ER). On December 11, 2012, Endo Pharmaceuticals Inc. (“Endo”) sued Actavis, Inc. and Actavis South Atlantic LLC (“Actavis South Atlantic”) in the United States District Court for the Southern District of New York, alleging that sales of the Company’s 7.5 mg and 15 mg oxymorphone extended-release tablets, generic versions of Endo’s Opana ® ER, infringe U.S. Patent Nos. 7,851,482; 8,309,122; and 8,329,216. Thereafter, FDA approved Actavis’ 5 mg, 10 mg, 20 mg, 30 mg, and 40 mg oxymorphone extended-release tablets and Endo filed a motion for a preliminary injunction seeking to prevent Actavis from selling the new strengths. On September 12, 2013, the district court denied Endo’s motion for a preliminary injunction and Actavis immediately launched the new strengths. On March 31, 2014, the Federal Circuit reversed the district court’s denial of Endo’s motion for a preliminary injunction and remanded the matter to the district court for further consideration. On January 13, 2015, Endo dismissed its claims against Actavis concerning the ‘482 patent. Trial with respect to the ‘122 and ‘216 patents began on March 23, 2015 and concluded on April 24, 2015.On August 14, 2015, the court found the ‘122 and ‘216 patents valid and infringed and ordered Actavis to cease selling its generic product within 60 days. Actavis filed a motion to amend the judgment to remove the injunction on continuing sales or in the alternative stay the injunction pending appeal. On October 8, 2015, the court tolled the 60 day period for Actavis to cease selling its generic product while the court considers the motion to amend the judgment. On April 29, 2016, the district court denied Actavis’ motion to amend the judgment to remove the injunction on continuing sales or in the alternative for a stay pending appeal, and Actavis discontinued selling its generic products. On May 3, 2016, Actavis filed in the Federal Circuit an emergency motion to stay the injunction pending appeal. That motion is currently pending. On November 7, 2014, Endo and Mallinckrodt LLC sued Actavis and certain of its affiliates in the United States District Court for the District of Delaware, alleging that sales of the Company’s generic versions of Opana ® ER, 5mg, 7.5 mg, 10 mg, 15 mg, 20 mg, 30 mg and 40 mg, infringe U.S. Patent Nos. 7,808,737 (which the USPTO recently issued to Endo) and 8,871,779 (which Endo licensed from Mallinckrodt). The case is currently pending, and trial is scheduled to begin on February 21, 2017. On September 23, 2015, the Magistrate Judge recommended granting Actavis’ motion to dismiss the ‘737 patent for invalidity/unpatentable subject matter. On November 17, 2015 the District Court Judge upheld the Magistrate’s recommendation regarding invalidity of the ‘737 patent and dismissed that patent from the case. The Company believes it has substantial meritorious defenses to the case. However, Actavis has sold its generic versions of Opana ® ER during the pendency of the above actions. Therefore, an adverse final determination that one of the patents in suit is valid and infringed could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows. Teva Namenda XR Patent Litigation. In December 2013, Forest Laboratories, Inc. (“Forest”) was named as a defendant in an action brought by Teva Pharmaceuticals USA, Inc. and Mayne Pharma International Pty Ltd. in the U.S. District Court for the District of Delaware. The complaint alleges that Forest infringes U.S. Patent No. 6,194,000 by making, using, selling, offering to sell, and importing Namenda XR. The district court has scheduled a trial to begin in July 2016. On October 29, 2015, Plaintiffs filed a First Amended Complaint, adding Forest Pharmaceuticals, Inc. as a named defendant. Defendants responded on November 18, 2015. On December 7, 2015, Plaintiffs filed a motion to dismiss Defendants’ counterclaims for invalidity and motion to strike certain of Defendants’ affirmative defenses concerning invalidity. Plaintiffs’ motion remains pending. The relief requested in the Amended Complaint includes damages, but not preliminary or permanent injunctive relief. On March 16, 2016, the Court entered an order denying the Company’s request to file a motion for summary judgment. The Company intends to continue to vigorously defend against this action. At this time, the Company does not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole. Product Liability Litigation Actonel® Litigation. Warner Chilcott is a defendant in approximately 193 cases and a potential defendant with respect to approximately 392 unfiled claims involving a total of approximately 593 plaintiffs and potential plaintiffs relating to Warner Chilcott’s bisphosphonate prescription drug Actonel ® . The claimants allege, among other things, that Actonel ® caused them to suffer osteonecrosis of the jaw (“ONJ”), a rare but serious condition that involves severe loss or destruction of the jawbone, and/or atypical fractures of the femur (“AFF”). All of the cases have been filed in either federal or state courts in the United States. Warner Chilcott is in the initial stages of discovery in these litigations. In addition, Warner Chilcott is aware of four purported product liability class actions that were brought against Warner Chilcott in provincial courts in Canada alleging, among other things, that Actonel ® caused the plaintiffs and the proposed class members who ingested Actonel ® to suffer atypical fractures or other side effects. It is expected that these plaintiffs will seek class certification. Plaintiffs have typically asked for unspecified monetary and injunctive relief, as well as attorneys’ fees. Warner Chilcott is indemnified by Sanofi for certain Actonel claims pursuant to a collaboration agreement relating to the two parties’ co-promotion of the product in the United States and other countries. In addition, Warner Chilcott is also partially indemnified by the Procter & Gamble Company (“P&G”) for ONJ claims that were pending at the time Warner Chilcott acquired P&G’s global pharmaceutical business in October 2009. In May and September 2013, Warner Chilcott entered into two settlement agreements that resolved a majority of the then-existing ONJ-related claims which are subject to the acceptance by the individual respective claimants. The Company believes it has substantial meritorious defenses to these cases and intends to defend these claims vigorously. Warner Chilcott maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if insurance does not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Alendronate Litigation. Beginning in 2010, approximately 129 product liability suits on behalf of approximately 170 plaintiffs have been filed against the Company and certain of its affiliates, including Cobalt Laboratories, as well as other manufacturers and distributors of alendronate for personal injuries including AFF and ONJ allegedly arising out of the use of alendronate. The actions are pending in various state and federal courts. Several of the cases were consolidated in an MDL proceeding in federal court in New Jersey. In 2012, the MDL court granted the Company’s motion to dismiss all of the cases then pending against the Company in the New Jersey MDL. The Third Circuit affirmed the dismissal. Any new cases against the Company filed in the MDL are subject to dismissal unless plaintiffs can establish that their claims should be exempted from the 2012 dismissal order. Other cases were consolidated in an MDL in federal court in New York, where the Company filed a similar motion to dismiss. The Court granted, in part, the motion to dismiss which has resulted in the dismissal of several other cases. The Company has also been served with six cases that are part of a consolidated litigation in the California state court. In 2012, the California court partially granted a motion filed on behalf of all generic defendants seeking dismissal. Appeals in the California cases have been exhausted and the Company has not yet been able to determine how that will affect the cases filed against it. The remaining active cases are part of a mass tort coordinated proceeding in New Jersey state court. In the New Jersey proceeding, the Court granted, in part, a motion to dismiss. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if our indemnification arrangements or insurance do not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Benicar® Litigation. The Company is named in approximately 1,410 actions involving allegations that Benicar®, a treatment for hypertension that Forest co-promoted with Daiichi Sankyo between 2002 and 2008, caused certain gastrointestinal injuries. Under Forest’s Co-Promotion Agreement, Daiichi Sankyo is defending us in these lawsuits. Celexa®/Lexapro® Litigation. Approximately 185 actions are pending against Forest and its affiliates involving allegations that Celexa® or Lexapro ® caused various birth defects. Several of the cases involve multiple minor-plaintiffs. The majority of these actions have been consolidated in state court in Missouri where one case is set for trial in September 2016. Five actions remain in New Jersey state court, none of which are set for trial. There are birth defect cases pending in other jurisdictions, including a case pending in the United States District Court for the Southern District of Mississippi that is set for trial in August 2017. The Company believes it has substantial meritorious defenses to the Celexa®/Lexapro® cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if insurance does not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Metoclopramide Litigation. Beginning in 2009, a number of product liability suits were filed against certain Company affiliates, including legacy Actavis and Watson companies, as well as other manufacturers and distributors of metoclopramide, for personal injuries allegedly arising out of the use of metoclopramide. Approximately 1,500 cases remain pending against Actavis, Watson and/or its affiliates in state and federal courts, representing claims by multiple plaintiffs. Discovery in these cases has not progressed beyond the preliminary stages as the Company has taken steps to dismiss the suits based on preemption including through initiating or defending appeals on such motions. The Company believes that, with respect to the majority of the cases against the legacy Watson companies, it will be defended in and indemnified by Pliva, Inc., an affiliate of Teva, from whom the Company purchased its metoclopramide product line in late 2008. With respect to the cases pending against the legacy Actavis companies, the Company recently reached an agreement in principle to resolve the majority of the matters. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if our indemnification arrangements or insurance do not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Propoxyphene Litigation. Beginning in 2011, a number of product liability suits were filed against Watson and certain of its affiliates, as well as other manufacturers and distributors of propoxyphene, for personal injuries including adverse cardiovascular events or deaths allegedly arising out of the use of propoxyphene. Cases are pending against Watson and/or its affiliates in various state and federal courts, representing claims by approximately 1,400 plaintiffs. A number of the cases were consolidated in an MDL in federal district court in Kentucky. On June 22, 2012, the MDL court granted the generic defendants’ joint motion to dismiss the remaining MDL cases. On June 27, 2014, the Sixth Circuit affirmed the district court’s dismissal. Plaintiffs did not file a petition for a writ of certiorari with the United States Supreme Court. In addition, approximately 35 cases were filed in California state court. These cases were removed to federal district courts and, after disputes over whether the cases should be remanded to state court, the Ninth Circuit Court of Appeals determined that the removals to federal court were proper. Many of the cases in California federal courts were transferred to the U.S. District Court for the Eastern District of Kentucky and consolidated for all pretrial proceedings in front of Judge Reeves, who presided over the MDL proceedings. The Court has issued a Show Cause Order requiring plaintiffs to show cause on or before April 18, 2016 why their claims against the Generic Defendants (including Watson) should not be dismissed pursuant to the Court’s prior order in the MDL dismissing all of the claims against the Generic Defendants with prejudice. The vast majority of these cases have been dismissed against the Generic Defendants, some voluntarily dismissed with prejudice and some dismissed on procedural grounds without prejudice. Three of the seven cases that remained in California district court have now been transferred to the Eastern District of Kentucky, and the others are likely to follow and to become subject to the Court’s Show Cause Order. Once the remaining procedural matters are resolved, the defendants will file demurrers and motions to dismiss the remaining suits pursuant to the Court’s Show Cause Order.. In addition, approximately eight lawsuits have been filed in Oklahoma which plaintiffs are seeking to have remanded from federal to state court. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if insurance does not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Testosterone Litigation. Beginning in 2014, a number of product liability suits were filed against the Company and certain of its affiliates, as well as other manufacturers and distributors of testosterone products, for personal injuries including but not limited to cardiovascular events allegedly arising out of the use of Androderm ® testosterone cypionate, AndroGel and/or testosterone enanthate. Actavis, Inc. and/or one or more of its subsidiaries have been served in approximately 454 currently pending actions, three of which are pending in state courts and the remainder of which are pending in federal court. The federal court actions have been consolidated in an MDL in federal court in Illinois. The defendants have responded to the plaintiffs’ master complaint in the MDL. Plaintiffs have agreed to dismiss all claims relating to any of Actavis’ generic TRT products from the cases. These cases are in the initial stages and discovery is in the early stages. The Company anticipates that additional suits will be filed. The Company believes that it has substantial meritorious defenses to these cases and maintains product liability insurance against such cases. However, litigation is inherently uncertain and the Company cannot predict the outcome of this litigation. These actions, if successful, or if insurance does not provide sufficient coverage against such claims, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Government Investigations, Government Litigation and Qui Tam Litigation Warner Chilcott. Beginning in February 2012, Warner Chilcott, along with several of its current and former employees in its sales organization and certain third parties, received subpoenas from the United States Attorney for the District of Massachusetts. The subpoena received by Warner Chilcott seeks information and documentation relating to a wide range of matters, including sales and marketing activities, payments to people who are in a position to recommend drugs, medical education, consultancies, prior authorization processes, clinical trials, off-label use and employee training (including with respect to laws and regulations concerning off-label information and physician remuneration), in each case relating to all of Warner Chilcott’s current key products. The Company has recorded a contingent liability for the quarter ended March 31, 2015 under ASC 450, Contingencies, based on its analysis of this matter, however, there can be no assurance that the Company’s estimate will not differ materially from the recorded contingent liability. The Company is also aware of three qui tam complaints filed by former Warner Chilcott sales representatives and unsealed in February and March 2013 and March 2014. Two unsealed federal qui tam complaints were filed in the federal court in Massachusetts and allege that Warner Chilcott violated Federal and state false claims acts through the promotion of all of Warner Chilcott’s current key products by, among other things, making improper claims concerning the products, providing kickbacks to physicians and engaging in improper conduct concerning prior authorizations. Since then, one of the two complaints was voluntarily dismissed. The remaining complaint seeks, among other things, treble damages, civil penalties of up to eleven thousand dollars for each alleged false claim and attorneys’ fees and costs. Other similar complaints may exist under seal. The United States of America elected not to intervene in the unsealed actions. On October 29, 2015, Warner Chilcott subsidiary, Warner Chilcott Sales (US) LLC, reached an agreement with the federal government, the 50 states and the District of Columbia that resolves both the government’s investigation and the pending federal qui tam case. As part of the settlement, on April 22, 2016, Warner Chilcott Sales (US) LLC pled guilty to a charge of health care fraud in violation of 18 U.S.C. § 1347. The third complaint was filed in California state court and contains similar allegations as the other qui tam complaints and asserts additional causes of action under California state law. The State of California declined to intervene in this action. Warner Chilcott filed a motion to dismiss this complaint and has reached an agreement to settle the California action. Forest. Forest received a subpoena dated August 5, 2013 from the U.S. Department of Health and Human Services, Office of Inspector General. The subpoena requests documents relating to the marketing and promotion of Bystolic ® , Savella ® , and Namenda ® , including with respect to speaker programs for these products. In February 2014, the U.S. District Court for the Eastern District of Wisconsin unsealed a qui tam complaint. The complaint asserts claims under the False Claims Act and contains allegations regarding off-label promotion of Bystolic ® and Savella ® and “kickbacks” provided to physicians to induce prescriptions of Bystolic ® , Savella ® , and Viibryd ®. Forest moved to dismiss the complaint. On January 6, 2015, the court granted Forest’s motion to dismiss the complaint. On February 5, 2016, the relator filed a second amended complaint. The U.S. Attorney’s Office declined to intervene in this action but has reserved the right to do so at a later date. On February 23 and 24, 2016, the parties participated in a non-binding mediation. As a result of the mediation, a framework now exists for the parties to reach an agreement to settle this matter. However, the framework is subject to a number of conditions, including additional approvals within the government and Forest. The settlement, if approved, would include the dismissal of the action pending in federal court in Wisconsin. The Company continues to cooperate with this investigation and to discuss these issues with the government. Forest received a subpoena, dated April 29, 2015, from the U.S. Department of Health and Human Services, Office of Inspector General (“OIG”). The subpoena requests documents relating to Average Manufacturer (“AMP”) and Best Price calculations for several of its products. The Company intends to cooperate fully with the OIG’s requests. In April 2014, the federal district court in Massachusetts unsealed a qui tam complaint which asserts claims under the False Claims Act and contains allegations regarding off-label promotion of Namenda®. The Company filed a motion to dismiss the relator’s Second Amended Complaint and the court granted in part and denied in part Forest’s motion, dismissing the False Claims Act conspiracy claim only. The U.S. Attorney’s Office declined to intervene in this action but has reserved the right to do so at a later date. The Company intends to vigorously defend itself in the litigations. However, this case is in the early stage of litigation, it is impossible to predict with certain the outcome of this case, and the Company can offer no assurance as to when the lawsuit will be decided, whether the Company will be successful in its defense and whether any additional similar suits will be filed. If this claim is successful, such claim could adversely affect the Company and could have a material adverse effect on the Company’s business, financial condition, results of operation and cash flows. Allergan. In December 2011, the federal district court in Pennsylvania issued an order partially unsealing the second amended qui tam complaint, filed by relators Herbert J. Nevyas, M.D. and Anita Nevyas-Wallace, M.D., to be informally provided to Allergan, Inc. The complaint asserts claims under Federal and State False Claims Acts and Federal and State Anti-Kickback Acts. On December 16, 2013, the court entered an order to unseal this qui tam action. On April 1, 2014, Allergan filed a motion to dismiss. On May 26, 2015, the court issued a ruling granting, in part, the motion to dismiss and denying it in part. Allergan filed an answer to the remaining claims on June 25, 2015. On July 7, 2015, the court scheduled trial in this matter for October 31, 2016. On November 25, 2014, prior to the completion of its merger with Actavis plc (“Actavis”), Allergan, Inc. received a request for documents and information from the United States Securities and Exchange Commission (“SEC”) related to Actavis or Salix Pharmaceuticals, Inc. (“Salix”). On June 30, 2015, Allergan, Inc. received a subpoena from the SEC requesting documents related to Actavis or Salix. On June 30, 2015, Actavis received a subpoena from the SEC requesting documents related to Allergan. In January 2016, the SEC began meeting with current and former employees of Allergan and Actavis and indicated that its review focused on the content of Allergan, Inc.’s disclosures during the pendency of the tender offer by Valeant Pharmaceuticals International for Allergan, Inc.’s common stock. The company is cooperating fully with the SEC in responding to the subpoena. Actavis. On June 25, 2015, the Company received a subpoena from the U.S. Department of Justice (“DOJ”), Antitrust Division seeking information relating to the marketing and pricing of certain of the Company’s generic products and communications with competitors about such products. The Company intends to cooperate fully with the DOJ’s requests. Patent Settlement Investigations. The Company and various of its affiliates have received letters and investigatory subpoenas from the U.S. Federal Trade Commission (“FTC”) indicating that the FTC is conducting a nonpublic investigations into certain agreements the Company have made to settle patent disputes with other brand and generic pharmaceutical companies. The Company is cooperating in responding to the investigations. Governmental Reimbursement and Drug Pricing Investigations and Litigation. The Company has also received investigatory subpoenas from the U.S. Attorney’s Office and various state agencies requesting information and documents relating to certain categories of drug pricing including, but not limited to, Average Wholesale Price (“AWP”), Wholesale Acquisition Cost (“WAC”), Average Manufacturer Price (“AMP”) and Best Price (“BP”). The Company intends to cooperate with this subpoena. Beginning in 1999, the Company was informed by the DOJ that it, along with numerous other pharmaceutical companies, is a defendant in a qui tam action brought in 1995 under the U.S. False Claims Act. Since that time, the Company also received and responded to notices or subpoenas from the U.S. House Committee on Energy and Commerce as well as from Attorneys General of various states, including Florida, Nevada, New York, California and Texas, relating to pharmaceutical pricing issues and whether allegedly improper actions by pharmaceutical manufacturers led to excessive payments by Medicare and/or Medicaid. Other state and federal inquiries regarding pricing and reimbursement issues are anticipated. The Company and certain of its subsidiaries have also been named as defendants in various lawsuits filed by numerous states and qui tam relators, including Wisconsin, Kentucky, Illinois, Mississippi, Missouri, South Carolina, Utah, Kansas and Louisiana. These actions allege generally that the plaintiffs (all governmental entities) were overcharged for their share of Medicaid drug reimbursement costs as a result of reporting by manufacturers of AWP that did not correspond to actual provider costs of prescription drugs. In 2011, Watson settled certain claims made against it by a relator in a qui tam action brought against the Company on behalf of the United States. The settlement of that qui tam action resolved all claims on behalf of the United States asserted in that action except for claims relating to the federal share of Medicaid payments made by the States of Alabama, Alaska, Kentucky, Idaho, Illinois, South Carolina and Wisconsin. The Company subsequently settled all claims, including the claims on behalf of the United States, brought by Alabama. In addition, the Company has reached settlements with the states of the Louisiana, Missouri, Kansas and South Carolina. In addition, the Company has begun having discussions with the plaintiffs in the Illinois and Wisconsin actions about a possible resolution of those matters. The court in the Utah case dismissed that state’s claims against the Company. The case against Watson on behalf of Kentucky was tried in November 2011. The jury reached a verdict in Watson’s favor on each of Kentucky’s claims against Watson. An agreed form of judgment has been entered and the case now has been dismissed with prejudice. The case against Watson on behalf of Mississippi was tried from November 2012 through April 2013. On August 28, 2013, the court issued a ruling in favor of the state and awarded the state $12.4 million in compensatory damages and civil penalties, and on March 20, 2014 issued its ruling imposing an additional $17.9 million in punitive damages. Post-trial motions were filed and denied by the court. The Company is appealing both the original and punitive damage awards. In addition, Forest and certain of its affiliates are defendants in four state court actions pending in Illinois, Mississippi, Utah and Wisconsin that contain similar actions as those raised in the actions against Watson. Discovery is ongoing in these actions. A trial in the Mississippi action is scheduled in August 2015. Forest and the other defendants filed a motion to dismiss Utah’s amended complaint. This motion to dismiss was denied in part, and discovery is proceeding. On February 17, 2014, the Wisconsin state court granted defendants’ motion to dismiss plaintiff’s Second Amended Complaint. However, the relator filed a separate action making the same basic allegations as in its amended complaint in the original action. The Company intends to continue to vigorously defend against these actions. At this time, the Company does not believe losses, if any, would have a material effect on the results of operations or financial position taken as a whole. On December 28, 2015, a putative class action complaint was filed in state court in Pennsylvania on behalf of a putative class of private payers. The complaint alleges that manufacturers of generic drugs including Actavis Group, Forest Laboratories, Inc. and Watson Pharmaceuticals, Inc., caused plaintiffs to overpay for prescription drug products through the use of inflated AWPs. The complaint alleges violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, negligent misrepresentation/fraud, unjust enrichment, civil conspiracy and aiding and abetting. Defendants removed this action to the federal court in Pennsylvania under the Class Action Fairness Act. An additional complaint then was filed in state court in Pennsylvania on behalf an individual indirect purchaser containing similar allegations to the class complaint. With regard to the remaining drug pricing actions, the Company believes that it has meritorious defenses and intends to vigorously defend itself in those actions. The Company continually monitors the status of these actions and may settle or otherwise resolve some or all of these matters on terms that the Company deems to be in its best interests. However, the Company can give no assurance that it will be able to settle the remaining actions on terms it deems reasonable, or that such settlements or adverse judgments in the remaining actions, if entered, will not exceed the amounts of the liability reserves. Additional actions by other states, cities and/or counties are anticipated. These actions and/or the actions described above, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. DESI Drug Reimbursement Litigation. In December 2009, the Company learned that numerous pharmaceutical companies, including certain subsidiaries of the Company, were named as defendants in a qui tam action pending in federal court in Massachusetts. The tenth amended complaint, which was served on certain of the Company’s subsidiaries, alleges that the defendants falsely reported to the United States that certain pharmaceutical products, including those subject to the Food and Drug Administration’s Drug Efficacy Study Implementation (“DESI”) review program, were eligible for Medicaid reimbursement and thereby allegedly caused false claims for payment to be made through the Medicaid program. The Company’s subsidiaries named in the action together with all other named defendants filed a Joint Motion to Dismiss the Tenth Amended Complaint on December 9, 2011. On February 25, 2013, the court granted the motion to dismiss as to all defendants. The plaintiff may appeal. On September 11, 2013, a similar action was filed against certain Company subsidiaries as well as Warner Chilcott and numerous other pharmaceutical company defendants by the State of Louisiana based on the same core set of allegations as asserted in the federal court action in Massachusetts. Defendants filed exceptions to plaintiffs’ complaint. On June 28, 2015, the State of Louisiana filed an amended complaint and defendants promptly moved to dismiss. On September 21, 2015, the court granted defendants’ motion to dismiss the amended complaint in its entirety. Additional actions alleging similar claims could be asserted. The Company believes that it has meritorious defenses to the claims and intends to vigorously defend itself against such allegations. However, these actions or similar actions, if successful, could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Medicaid Price Adjustments. The Company has notified the Centers for Medicare and Medicaid Services (“CMS”) that certain of the legacy Actavis group’s Medicaid price submissions require adjustment for the period 2007 through 2012. The Company is in the process of completing the resubmissions. Based on prevailing CMS practices the Company does not expect to incur penalties in connection with the resubmissions. With respect to periods prior to 2007, the Company has advised CMS that its records are insufficient to support a reliable recalculation of its price submissions, and has proposed not to recalculate the price submissions for such periods. Because there are insufficient records to support a reliable recalculation of its price submissions prior to 2007, at this time the amount of any potential liability related to the price submissions prior to 2007 is not estimable and the Company has not concluded that any liability for periods prior to 2007 is probable. The Company believes it has substantial meritorious positions and defenses with respect to these pricing resubmission matters. However, if CMS were to successfully pursue claims against the Company for the periods in question, such claims could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Hydrocortisone Investigation. On March 8, 2016, the Company and certain of its affiliates received notice from the UK Competition and Markets Authority (“CMA”) that it has launched a formal investigation under Section 25 of the Competition Act of 1998 (“CA98”) into suspected abuse of dominance by a Company subsidiary in relation to the supply of 10mg and 20mg hydrocortisone tablets. The CMA is investigating whether the conduct infringes the Chapter II prohibition of the CA98 and/or Article 102 of the Treaty on the Functioning of the European Union. The Company is fully cooperating with the investigation. This government investigation could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Paroxetine Investigation. On April 19, 2013, the UK Office of Fair Trading (which closed in April, 2014 in connection with a government restructuring and transferred responsibility for this matter to the U.K. CMA) issued a Statement of Objections against GlaxoSmithKline (“GSK”) and various generic drug companies, including Actavis UK Limited, formerly known as Alpharma Limited, now a subsidiary of the Company, alleging that GSK’s settlements with such generic drug companies improperly delayed generic entry of paroxetine, in violation of the United Kingdom’s competition laws. The Company has responded to the Statement of Objections, however, on February 12, 2016 the UK CMA imposed a fine on the Company. The Company believes it has substantial meritorious defenses to the allegations. However, an adverse determination in the matter could have an adverse effect on the Company’s business, results of operations, financial condition and cash flows. Romanian Investigation. In July 2015, the Company received a subpoena as part of a nationwide investigation of the pharmaceutical industry conducted by the Romanian government. The purpose of the investigation is to gather documents and information, and to examine sponsorship arrangements concluded with certain oncologists and hematologists during the period from January 2012 through June 2015. The Company is fully cooperating with the investigation. This government investigation could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. The Company and its affiliates are involved in various other disputes, governmental and/or regulatory inspections, inquires, investigations and proceedings that could result in litigation, and other litigation matters that arise from time to time. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of operations, financial condition and cash flows.
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Warner Chilcott Limited ("WCL") Guarantor and Non-Guarantor Condensed Consolidating Financial Information |
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Warner Chilcott Limited ("WCL") Guarantor and Non-Guarantor Condensed Consolidating Financial Information | NOTE 21 – Warner Chilcott Limited (“WCL”) Guarantor and Non-Guarantor Condensed Consolidating Financial Information The following financial information is presented to segregate the financial results of WCL, Actavis Funding SCS, and Actavis, Inc. (the issuers of the long-term notes), the guarantor subsidiaries for the long-term notes and the non-guarantor subsidiaries. The guarantors jointly and severally, and fully and unconditionally, guarantee the Company’s obligation under the long-term notes. The information includes elimination entries necessary to consolidate the guarantor and the non-guarantor subsidiaries. Investments in subsidiaries are accounted for using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries, equity and intercompany balances and transactions. WCL, Actavis Capital S.a.r.l. and Actavis, Inc. are guarantors of the long-term notes. Warner Chilcott Limited has revised its consolidating financial statements as previously presented in Footnote 20 of the March 31, 2015 Quarterly Report on Form 10-Q and its December 31, 2015 balance sheet in Footnote 26 of the Annual Report due to a change in the Company’s legal entity structure and other reclassifications that occurred during the three months ended March 31, 2016. As a result, prior period information has been recast to conform to the current period presentation. As part of the pending Teva Transaction, the Company anticipates further legal entity structure changes, which will impact the presentation of this footnote. The following financial information presents the consolidating balance sheets as of March 31, 2016 and December 31, 2015, the related statement of operations for the three months ended March 31, 2016 and 2015 and the statement of cash flows for the three months ended March 31, 2016 and 2015.
Warner Chilcott Limited Consolidating Balance Sheets As of March 31, 2016 (Unaudited; in millions)
Warner Chilcott Limited Consolidating Balance Sheets As of December 31, 2015 ($ in millions)
Warner Chilcott Limited Consolidating Statements of Operations For the Three Months Ended March 31, 2016 (Unaudited; in millions)
Warner Chilcott Limited Consolidating Statements of Operations For the Three Months Ended March 31, 2015 (Unaudited; in millions)
Warner Chilcott Limited Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2016 (Unaudited; in millions)
Warner Chilcott Limited Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2015 (Unaudited; in millions)
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Subsequent Events |
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Subsequent Events [Abstract] | |
Subsequent Events | NOTE 22 – Subsequent Events On November 23, 2015, the Company announced that it entered into a definitive merger agreement (the “Pfizer Agreement”) under which Pfizer Inc. (“Pfizer”), a global innovative biopharmaceutical company, and Allergan plc would merge in a stock and cash transaction. On April 6, 2016, the Company announced that its merger agreement with Pfizer was terminated by mutual agreement. In connection with the termination of the merger agreement, Pfizer has agreed to pay the Company $150.0 million for reimbursement of expenses associated with the transaction which will be reported as other income in the three months ending June 30, 2016. On April 6, 2016, the Company announced that they entered an agreement with Heptares Therapeutics (“Heptares”) under which the Company will license exclusive global rights to a broad portfolio of novel subtype-selective muscarinic receptor agonists in development for the treatment of major neurological disorders, including Alzheimer's disease. Under the terms of the agreement, Heptares will receive an upfront payment of $125.0 million and is eligible to receive contingent milestone payments of up to approximately $665.0 million associated with the successful Phase 1, 2 and 3 clinical development studies and the launch of the first three licensed compounds for multiple indications and up to approximately $2.575 billion associated with achieving certain annual sales thresholds during the several years following launch. In addition, Heptares is eligible to receive royalties on net sales of all products resulting from the partnership. On April 21, 2016, the Company acquired Topokine Therapeutics (“Topokine”), a privately held, clinical-stage biotechnology company focused on developing topical medicines for fat reduction. Under the terms of the agreement, the Company acquired Topokine for an upfront payment of $85.0 million and success-based development and sales milestones of up to $260.0 million for XAF5, a first-in-class topical agent in late-stage development for the treatment of steatoblepharon, also known as undereye bags. |
Summary of Significant Accounting Policies (Policies) |
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Reclassifications | Reclassifications In April 2015, the FASB issued guidance which changes the classification of debt issuance costs from being an asset on the balance sheet to netting the costs against the carrying value of the debt. As a result, the Company reclassified debt issuance costs as of December 31, 2015 by decreasing “prepaid expenses and other current assets” and “current portion of long-term debt and capital leases” by $36.3 million as well as decreasing “investments and other assets” and “long-term debt and capital leases” by $159.5 million. In addition, the Company made certain presentation reclassifications relating to segment results and guarantor financial statements. |
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Revenue Recognition | Revenue Recognition General Revenue from product sales is recognized when title and risk of loss to the product transfers to the customer, which is based on the transaction shipping terms. Recognition of revenue also requires reasonable assurance of collection of sales proceeds, the seller’s price to the buyer to be fixed or determinable and the completion of all performance obligations. The Company warrants products against defects and for specific quality standards, permitting the return of products under certain circumstances. Product sales are recorded net of all sales-related deductions including, but not limited to: chargebacks, trade discounts, billback adjustments, sales returns and allowances, commercial and government rebates, customer loyalty programs and fee for service arrangements with certain distributors, which we refer to in the aggregate as “SRA” allowances. Royalty and commission revenue is recognized as a component of net revenues in accordance with the terms of their respective contractual agreements when collectability is reasonably assured and when revenue can be reasonably measured. |
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Provisions for SRAs | Provisions for SRAs As is customary in the pharmaceutical industry, our gross product sales are subject to a variety of deductions in arriving at reported net product sales. When the Company recognizes gross revenue from the sale of products, an estimate of SRA is recorded, which reduces the product revenues. Accounts receivable and/or accrued liabilities are also reduced and/or increased by the SRA amount depending on whether we have the right of offset with the customer. These provisions are estimated based on historical payment experience, historical relationship of the deductions to gross product revenues, government regulations, estimated utilization or redemption rates, estimated customer inventory levels and current contract sales terms. The estimation process used to determine our SRA provision has been applied on a consistent basis and no material revenue adjustments have been necessary to increase or decrease our reserves for SRA as a result of a significant change in underlying estimates. The Company uses a variety of methods to assess the adequacy of the SRA reserves to ensure that our financial statements are fairly stated. Chargebacks — A chargeback represents an amount payable in the future to a wholesaler for the difference between the invoice price paid by our wholesale customer for a particular product and the negotiated contract price that the wholesaler’s customer pays for that product. The chargeback provision and related reserve varies with changes in product mix, changes in customer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of the expected wholesaler sell-through levels to indirect customers at certain contract prices. The Company validates the chargeback accrual quarterly through a review of the inventory reports obtained from our largest wholesale customers. This customer inventory information is used to verify the estimated liability for future chargeback claims based on historical chargeback and contract rates. These large wholesalers represent the vast majority of the recipients of the Company’s chargeback payments. We continually monitor current pricing trends and wholesaler inventory levels to ensure the liability for future chargebacks is fairly stated. Rebates — Rebates include volume related incentives to direct and indirect customers, third-party managed care and Medicare Part D rebates, Medicaid rebates and other government rebates. Rebates are accrued based on an estimate of claims to be paid for product sold into trade by the Company. Volume rebates are generally offered to customers as an incentive to use the Company’s products and to encourage greater product sales. These rebate programs include contracted rebates based on customers’ purchases made during an applicable monthly, quarterly or annual period. The provision for third-party rebates is estimated based on our customers’ contracted rebate programs and the Company’s historical experience of rebates paid. Any significant changes to our customer rebate programs are considered in establishing the provision for rebates. The provisions for government rebates are based, in part, upon historical experience of claims submitted by the various states / authorities, contractual terms and government regulations. We monitor legislative changes to determine what impact such legislation may have on our provision. Cash Discounts — Cash discounts are provided to customers that pay within a specific period. The provision for cash discounts is estimated based upon invoice billings and historical customer payment experience. The Company’s experience of payment history is fairly consistent and most customer payments qualify for the cash discount. Returns and Other Allowances — The Company’s provision for returns and other allowances include returns, pricing adjustments, promotional allowances, loyalty cards and billback adjustments. Consistent with industry practice, the Company maintains a returns policy that allows customers to return product for a credit. In accordance with the Company’s policy, credits for customer returns of products are applied against outstanding account activity or are settled in cash. Product exchanges are not permitted. Customer returns of product are generally not resalable. The Company’s estimate of the provision for returns is based upon historical experience and current trends of actual customer returns. Additionally, we consider other factors when estimating the current period returns provision, including levels of inventory in the distribution channel, as well as significant market changes which may impact future expected returns. Pricing adjustments, which includes shelf stock adjustments, (primarily relate to our generics business held for sale) are credits issued to reflect price decreases in selling prices charged to the Company’s direct customers. Shelf stock adjustments are based upon the amount of product our customers have in their inventory at the time of an agreed-upon price reduction. The provision for shelf stock adjustments is based upon specific terms with the Company’s customers and includes estimates of existing customer inventory levels based upon their historical purchasing patterns. We regularly monitor all price changes to evaluate the Company’s reserve balances. The adequacy of these reserves is readily determinable as pricing adjustments and shelf stock adjustments are negotiated and settled on a customer-by-customer basis. Promotional allowances are credits that are issued in connection with a product launch or as an incentive for customers to carry our product. The Company establishes a reserve for promotional allowances based upon contractual terms. Billback adjustments, which primarily relate to our generics business held for sale, are credits that are issued to certain customers who purchase directly from us as well as indirectly through a wholesaler. These credits are issued in the event there is a difference between the customer’s direct and indirect contract price. The provision for billbacks is estimated based upon historical purchasing patterns of qualified customers who purchase product directly from us and supplement their purchases indirectly through our wholesale customers. Loyalty cards allow the end user patients a discount per prescription and are accrued based on historical experience, contract terms and the volume of product and cards in the distribution channel. Accounts receivable balances in the Company’s consolidated financial statements are presented net of SRA estimates. SRA balances in accounts receivable were $208.1 million and $263.8 million at March 31, 2016 and December 31, 2015, respectively. SRA balances within accounts payable and accrued expenses were $1,800.7 million and $1,570.0 million at March 31, 2016 and December 31, 2015, respectively. The movements in the SRA reserve balances for continuing operations in the three months ended March 31, 2016 are as follows ($ in millions):
The provisions recorded to reduce gross product sales to net product sales, excluding discontinued operations, were as follows ($ in millions):
The Company also had SRA reserves relating to discontinued operations of $1,598.3 million and $1,720.1 million as of March 31, 2016 and December 31, 2015, respectively. |
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Litigation and Contingencies | Litigation and Contingencies The Company is involved in various legal proceedings in the normal course of its business, including product liability litigation, intellectual property litigation, employment litigation and other litigation. Additionally, the Company, in consultation with its counsel, assesses the need to record a liability for contingencies on a case-by-case basis in accordance with FASB Accounting Standards Codification (“ASC”) Topic 450 “Contingencies” (“ASC 450”). Accruals are recorded when the Company determines that a loss related to a matter is both probable and reasonably estimable. These accruals are adjusted periodically as assessment efforts progress or as additional information becomes available. Acquired contingencies in business combinations are recorded at fair value to the extent determinable, otherwise in accordance ASC 450. Refer to “NOTE 20 — Commitments and Contingencies” for more information. |
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Earnings Per Share ("EPS") | Earnings Per Share (“EPS”) The Company computes EPS in accordance with ASC Topic 260, “Earnings Per Share” (“ASC 260”) and related guidance, which requires two calculations of EPS to be disclosed: basic and diluted. Basic EPS is computed by dividing net (loss) / income by the weighted average ordinary shares outstanding during a period. Diluted EPS is based on the treasury stock method and includes the effect from potential issuance of ordinary shares, such as shares issuable pursuant to the exercise of stock options and restricted stock units. Diluted EPS also includes the impact of ordinary share equivalents to be issued upon the mandatory conversion of the Company’s preferred shares. Ordinary share equivalents have been excluded where their inclusion would be anti-dilutive. A reconciliation of the numerators and denominators of basic and diluted EPS consisted of the following ($ in millions, except per share amounts):
Stock awards to purchase 5.4 million ordinary shares for the three months ended March 31, 2016, were outstanding, but not included in the computation of diluted EPS, because the awards were anti-dilutive for continuing operations and as such the treatment for discontinued operations is also anti-dilutive. The weighted average impact of ordinary share equivalents of 17.6 million for the three months ended March 31 2016, which are anticipated to result from the mandatory conversion of the Company’s preferred shares were not included in the calculation of diluted EPS as their impact would be anti-dilutive. Stock awards to purchase 3.5 million ordinary shares during the three months ended March 31, 2015 were outstanding, but not included in the computation of diluted EPS, because the impact of the awards were anti-dilutive for continuing operations and as such the treatment for discontinued operations is also anti-dilutive. The weighted average impact of ordinary share equivalents of 5.5 million which are anticipated to result from the mandatory conversion of the Company’s preferred shares as of March 31, 2015 were not included in the calculation of diluted EPS as their impact would be anti-dilutive. |
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Restructuring Costs | Restructuring Costs The Company records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. In accordance with existing benefit arrangements, employee severance costs are accrued when the restructuring actions are probable and estimable. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. The Company also incurs costs with contract terminations and costs of transferring products as part of restructuring activities. Refer to “NOTE 19 — Business Restructuring Charges” for more information. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), with an effective date for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, for public business entities, certain not-for-profit entities, and certain employee benefit plans. The effective date for ASU 2014-09 was deferred by one year through the issuance of ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations. In January 2016, the FASB issued Accounting Standards Update 2016-01, which changes the requirement to require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance is not anticipated to have a material impact on the Company’s financial position or results of operations. In February 2016, the FASB issued Accounting Standards Update 2016-02, which states that a lessee should recognize the assets and liabilities that arise from leases. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, the pronouncement will have on our financial positions and results of operations. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. The Company is evaluating the impact the pronouncement will have on our financial positions and results of operations. In March 2016, the FASB has issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 Revenue from Contracts with Customers requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (i.e., the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is an agent). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date and transition of these amendments is the same as the effective date and transition requirements in Topic 606. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations. In April 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The Company is evaluating the impact, if any, the pronouncement will have on both historical and future financial positions and results of operations.
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Reconciliation of Warner Chilcott Limited Results to Allergan plc Results (Tables) |
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Adjusted Earnings Before Interest Taxes Depreciation And Amortization And Other Non Cash Items [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Assets Reconciliation Results of Warner Chilcott Limited to Allergan Plc |
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Summary of Operating Profit Loss Reconciliation Results of Warner Chilcott Limited to Allergan Plc |
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Summary of Significant Accounting Policies (Tables) |
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Summary Of Significant Accounting Policies [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Activity in Gross-to-Net Revenue Excluding Discontinued Operations |
The provisions recorded to reduce gross product sales to net product sales, excluding discontinued operations, were as follows ($ in millions):
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Earnings Per Share | A reconciliation of the numerators and denominators of basic and diluted EPS consisted of the following ($ in millions, except per share amounts):
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Continuing Operations [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Movements in SRA Reserve Balances | The movements in the SRA reserve balances for continuing operations in the three months ended March 31, 2016 are as follows ($ in millions):
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Acquisitions and Other Agreements (Tables) |
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Pro Forma Results of Businesses Acquired | The pro forma results of the businesses acquired that materially impacted the reported results of the Company are as follows (unaudited; $ in millions except per share information):
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Summary of Transaction and Integration Costs | As a result of the Forest Acquisition, the Company incurred the following transaction and integration costs in the three months ended March 31, 2016 and March 31, 2015, respectively ($ in millions):
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AqueSys [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Values of Assets Acquired and Liabilities Assumed at Acquisition Date | The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date ($ in millions):
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Kythera [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Values of Assets Acquired and Liabilities Assumed at Acquisition Date | The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date ($ in millions):
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Summary of Fair Values of Assets Acquired and Liabilities Assumed at Acquisition Date | The following table summarizes the final fair values of the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date ($ in millions):
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Allergan, Inc. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Transaction and Integration Costs | As a result of the acquisition, the Company incurred the following transaction and integration costs in the three months ended March 31, 2016 and 2015 ($ in millions):
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Discontinued Operations (Tables) |
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Discontinued Operations And Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Key Financial Results of Global Generics Business from Discontinued Operations | The following table presents key financial results of the global generics business included in "Income from discontinued operations" for the three months ended March 31, 2016 and 2015 ($ in millions):
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Schedule of Aggregate Carrying Amounts of Major Classes of Assets and Liabilities | The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the global generics business to be disposed of ($ in millions):
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Schedule of Depreciation Amortization and Significant Operating and Investing Noncash Items of Discontinued Operations | The depreciation, amortization and significant operating and investing non-cash items of the discontinued operations were as follows ($ in millions):
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Assets Held For Sale (Tables) |
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Discontinued Operations And Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Assets Held for Sale | The following represents net assets held for sale ($ in millions):
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Share-Based Compensation (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Assumptions of Options based on Black-Scholes Valuation Model | Using the Black-Scholes valuation model, the fair value of options is based on the following assumptions:
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Share-Based Compensation Expense Recognized in Company's Results of Operations | Share-based compensation expense recognized in the Company’s results of operations for the three months ended March 31, 2016 and 2015 were as follows ($ in millions):
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Summary of Equity Award Activity for Unvested Restricted Stock and Stock Units | The following is a summary of equity award activity for unvested restricted stock and stock units in the period from December 31, 2015 through March 31, 2016:
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Summary of Equity Award Activity for Non-Qualified Options to Purchase Ordinary Shares | The following is a summary of equity award activity for non-qualified options to purchase ordinary shares in the period from December 31, 2015 through March 31, 2016:
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Reportable Segments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Revenues, Operating Expenses Contribution Information by Reportable Segment | Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three months ended March 31, 2016 and 2015 ($ in millions):
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Schedule of Reconciliation of Net Revenues for Operating Segments | The following is a reconciliation of net revenues for the operating segments to the Company’s net revenues for the three months ended March 31, 2016 and 2015 ($ in millions):
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Schedule Of Revenue Classified By Products | The following tables present global net revenues for the top products of the Company for the three months ended March 31, 2016 and 2015 ($ in millions):
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US Brands [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Net Revenues by Segment | The following table presents net revenues for the US Brands segment for the three months ended March 31, 2016 and 2015 ($ in millions):
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US Medical Aesthetics [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Net Revenues by Segment |
The following table presents revenues for the US Medical Aesthetics segment for the three months ended March 31, 2016 and 2015 ($ in millions):
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International Brands [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Net Revenues by Segment | The following table presents net revenues for the International Brands segment for the three months ended March 31, 2016 and 2015 ($ in millions):
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Inventories (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories | Inventories consisted of the following ($ in millions):
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Investments and Other Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities, Other Investments and Other Assets | Investments in marketable securities, other investments and other assets consisted of the following ($ in millions):
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Accounts Payable and Accrued Expenses (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables And Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses consisted of the following ($ in millions):
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Goodwill, Product Rights and Other Intangible Assets (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | Goodwill for the Company’s segments consisted of the following ($ in millions):
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Schedule of Cost Basis on Product Rights and Other Intangible Assets | Product rights and other intangible assets consisted of the following ($ in millions):
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Schedule of Annual Amortization Expense on Product Rights and Other Related Intangibles | Assuming no additions, disposals or adjustments are made to the carrying values and/or useful lives of the intangible assets, annual amortization expense on product rights and other related intangibles as of March 31, 2016 over the remainder of 2016 and each of the next five years is estimated to be as follows ($ in millions):
|
Long-Term Debt and Capital Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-Term Debt and Capital Leases | Total debt and capital leases consisted of the following ($ in millions):
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Schedule of Annual Debt Maturities | As of March 31, 2016, annual debt maturities were as follows ($ in millions):
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Other Long-Term Liabilities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Other Long-Term Liabilities | Other long-term liabilities consisted of the following ($ in millions):
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Income Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||
Summary of Acquired U.S. Entities and Taxable Years that are Currently under Audit by IRS | Due to our numerous acquisitions, the Company has several concurrent audits still pending with the IRS as set forth below:
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Shareholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Shareholders' Equity | A summary of the changes in shareholders’ equity for the three months March 31, 2016 consisted of the following ($ in millions):
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Summary of Movements in Accumulated Other Comprehensive Income/ (Loss) | The movements in accumulated other comprehensive income / (loss) for the three months ended March 31, 2016 were as follows ($ in millions):
The movements in accumulated other comprehensive income / (loss) for the three months ended March 31, 2015 were as follows ($ in millions):
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Fair Value Measurement (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | Assets and liabilities measured at fair value or disclosed at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 consisted of the following (in millions):
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Summary of Notional Principal and Fair Value of Company's Outstanding Foreign Currency Derivative Financial Instruments | At March 31, 2016 and December 31, 2015, the notional principal and fair value of the Company’s outstanding foreign currency derivative financial instruments were as follows ($ in millions, except average contract rate or strike amount):
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Change in Fair Value of Contingent Consideration Obligations | Changes in the fair value of the contingent consideration obligations, including accretion, are recorded in our consolidated statements of operations as follows ($ in millions):
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Summary of Changes in Fair Value of all Financial Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs |
The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2016 and 2015 ($ in millions):
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Schedule of Contingent Consideration Obligations | During the three months ended March 31, 2016, the following activity in contingent consideration obligations by acquisition was incurred ($ in millions):
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Business Restructuring Charges (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring And Related Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Activity Related to Business Restructuring and Facility Rationalization Activities | During 2016, activity related to our business restructuring and facility rationalization activities primarily related to the cost optimization initiatives in conjunction with the Allergan Acquisition. Restructuring activities for the three months ended March 31, 2016 as follows ($ in millions):
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Warner Chilcott Limited ("WCL") Guarantor and Non-Guarantor Condensed Consolidating Financial Information (Tables) - Warner Chilcott Acquisition [Member] |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Consolidating Balance Sheets | Warner Chilcott Limited Consolidating Balance Sheets As of March 31, 2016 (Unaudited; in millions)
Warner Chilcott Limited Consolidating Balance Sheets As of December 31, 2015 ($ in millions)
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Consolidating Statements of Operations | Warner Chilcott Limited Consolidating Statements of Operations For the Three Months Ended March 31, 2016 (Unaudited; in millions)
Warner Chilcott Limited Consolidating Statements of Operations For the Three Months Ended March 31, 2015 (Unaudited; in millions)
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Consolidating Statement of Cash Flows | Warner Chilcott Limited Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2016 (Unaudited; in millions)
Warner Chilcott Limited Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2015 (Unaudited; in millions)
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General - Additional Information (Detail) shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Jul. 26, 2015
USD ($)
shares
|
Mar. 31, 2016
Country
|
|
Segment Reporting Information [Line Items] | ||
Number of operating countries | Country | 100 | |
Allergan Global Generic Pharmaceuticals Business and Certain Other Assets | Teva Pharmaceutical Industries Ltd [Member] | ||
Segment Reporting Information [Line Items] | ||
Proceeds Expected To Be Received From Divestiture of Businesses | $ 33,750 | |
Ordinary shares expected to be received from divestiture of businesses | shares | 100.3 | |
Stock Expected To Be Received In Divestiture of Businesses | $ 6,750 | |
Business divestiture expected effective period description | The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2016. |
Summary of Significant Accounting Policies - Movements in SRA Reserve Balances (Detail) - Continuing Operations [Member] - Sales Return and Allowances [Member] $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2016
USD ($)
| |
Valuation And Qualifying Accounts Disclosure [Line Items] | |
Beginning Balance | $ 1,833.8 |
Provision to reduce gross product sales to net product sales | 1,668.0 |
Payments and other | (1,493.0) |
Ending Balance | $ 2,008.8 |
Summary of Significant Accounting Policies - Summary of Activity in Gross-to-Net Revenue Excluding Discontinued Operations (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Organization Consolidation And Presentation Of Financial Statements [Abstract] | ||
Gross product sales | $ 5,429.4 | $ 3,576.7 |
Provisions to reduce gross product sales to net product sales | (1,668.0) | (1,041.1) |
Net product sales | $ 3,761.4 | $ 2,535.6 |
Percentage of provisions to gross sales | 30.70% | 29.10% |
Summary of Significant Accounting Policies - Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Net income / (loss): | ||
Net (loss) attributable to ordinary shareholders excluding income/(loss) from discontinued operations, net of tax | $ (151.3) | $ (809.6) |
Income from discontinued operations, net of tax | 337.4 | 274.4 |
Net income / (loss) attributable to ordinary shareholders | $ 186.1 | $ (535.2) |
Basic weighted average ordinary shares outstanding | 394.8 | 289.5 |
Basic EPS: | ||
Continuing operations | $ (0.38) | $ (2.80) |
Discontinued operations | 0.85 | 0.95 |
Net income / (loss) per share - basic | $ 0.47 | $ (1.85) |
Diluted weighted average ordinary shares outstanding | 394.8 | 289.5 |
Diluted EPS: | ||
Continuing operations | $ (0.38) | $ (2.80) |
Discontinued operations | 0.85 | 0.95 |
Net income / (loss) per share - diluted | $ 0.47 | $ (1.85) |
Acquisitions and Other Agreements, Pro Forma Results of Businesses Acquired (Detail) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Business Acquisition [Line Items] | ||
Net Revenue | $ 3,795.9 | $ 2,562.6 |
Net income / (loss) attributable to ordinary shareholder/members | $ 186.1 | $ (535.2) |
Net (loss) per share | ||
Basic | $ 0.47 | $ (1.85) |
Diluted | $ 0.47 | $ (1.85) |
Pro Forma [Member] | ||
Business Acquisition [Line Items] | ||
Net Revenue | $ 4,085.6 | |
Net income / (loss) attributable to ordinary shareholder/members | $ (157.5) | |
Net (loss) per share | ||
Basic | $ (0.40) | |
Diluted | $ (0.40) | |
Allergan, Inc. [Member] | ||
Business Acquisition [Line Items] | ||
Net Revenue | $ 1,523.0 | |
Net income / (loss) attributable to ordinary shareholder/members | $ 377.7 |
Discontinued Operations - Summary of Key Financial Results of Global Generics Business Income from Discontinued Operations (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Discontinued Operations And Disposal Groups [Abstract] | ||
Third party revenues | $ 1,255.3 | $ 1,671.6 |
Related party sales | 41.3 | 69.5 |
Net revenues | 1,296.6 | 1,741.1 |
Operating expenses: | ||
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights) | 693.2 | 762.8 |
Research and development | 112.3 | 113.3 |
Selling and marketing | 112.0 | 165.9 |
General and administrative | 128.4 | 152.5 |
Amortization | 137.6 | |
In-process research and development impairments, asset sales and impairments, net | 53.2 | |
Total operating expenses | 1,045.9 | 1,385.3 |
Operating income | 250.7 | 355.8 |
Other (expense) income, net | (0.1) | |
(Benefit) / provision for income taxes | (86.7) | 81.3 |
Net income from discontinued operations | $ 337.4 | $ 274.4 |
Discontinued Operations - Additional Information (Detail) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2016
USD ($)
| |
Discontinued Operations And Disposal Groups [Abstract] | |
Deferred tax benefit related to investment in certain subsidiaries | $ 116.1 |
Discontinued Operations - Schedule of Aggregate Carrying Amounts of Major Classes of Assets and Liabilities (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Assets: | ||
Accounts receivable, net | $ 1,997.1 | $ 2,089.7 |
Inventories | 1,190.6 | 1,138.5 |
Prepaid expenses and other current assets | 311.4 | 302.8 |
Property, plant and equipment, net | 1,386.7 | 1,355.6 |
Investments and other assets | 32.1 | 33.0 |
Non-current deferred tax assets | 187.4 | 223.7 |
Product rights and other intangibles | 2,937.9 | 2,919.3 |
Goodwill | 6,092.7 | 6,009.7 |
Total assets | 14,135.9 | 14,072.3 |
Liabilities: | ||
Accounts payable and accrued expenses | 1,331.3 | 1,455.8 |
Income taxes payable | 77.0 | 33.9 |
Debt and capital leases | 5.2 | 5.8 |
Other long-term liabilities | 85.7 | 92.0 |
Other taxes payable | 61.1 | 69.0 |
Long-term deferred tax liabilities | 362.3 | 415.4 |
Total liabilities | $ 1,922.6 | $ 2,071.9 |
Discontinued Operations - Schedule of Depreciation Amortization and Significant Operating and Investing Noncash Items of Discontinued Operations (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Discontinued Operations And Disposal Groups [Abstract] | ||
Depreciation from discontinued operations | $ 37.0 | |
Amortization from discontinued operations | 137.6 | |
Capital expenditures | $ 34.6 | 57.1 |
Deferred income taxes (benefit) / expense | $ (104.0) | $ 63.8 |
Assets Held For Sale - Net Assets Held for Sale (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Long Lived Assets Held-for-sale [Line Items] | ||
Prepaid expenses and other assets | $ 9.3 | $ 9.3 |
Total assets held for sale | 9.3 | 9.3 |
Net assets held for sale | 12,222.6 | 12,009.7 |
Teva Pharmaceutical Industries Ltd [Member] | ||
Long Lived Assets Held-for-sale [Line Items] | ||
Net assets held for sale | 14,135.9 | 14,072.3 |
Net liabilities held for sale | $ 1,922.6 | $ 2,071.9 |
Share-Based Compensation - Share-Based Compensation Expense Recognized in Company's Results of Operations (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 108.2 | $ 352.6 |
Equity Based Compensation Awards [Member] | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Total stock-based compensation expense | 99.0 | 225.5 |
Cash-Settled Equity Awards [Member] | Allergan, Inc. [Member] | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 127.1 | |
Non Equity-Settled Awards Other [Member] | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 9.2 |
Share-Based Compensation - Summary of Equity Award Activity for Unvested Restricted Stock and Stock Units (Parenthetical) (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2016
shares
| |
Non-qualified Options [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Options, Forfeited | 14,000 |
Share-Based Compensation - Summary of Equity Award Activity for Non-Qualified Options to Purchase Ordinary Shares (Parenthetical) (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2016
shares
| |
Non-qualified Options [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Options, Forfeited | 29,000 |
Reportable Segments - Additional Information (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2016
Segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 4 |
Reportable Segments - Reconciliation of Net Revenues for Operating Segments (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Segment Reporting Information [Line Items] | ||
Net revenues | $ 3,795.9 | $ 2,562.6 |
Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenues | 3,790.4 | 2,562.0 |
Corporate Revenues [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenues | $ 5.5 | $ 0.6 |
Reportable Segments - Schedule of Revenue, by Segment (Parenthetical) (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Segment Reporting Information [Line Items] | ||
Net revenues | $ 3,795.9 | $ 2,562.6 |
US Brands [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenues | 2,302.7 | 1,809.2 |
US Brands [Member] | Cardiovascular [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenues | $ 163.6 | $ 163.7 |
Inventories - Schedule of Inventories (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 284.1 | $ 242.3 |
Work-in-process | 104.9 | 149.7 |
Finished goods | 741.1 | 706.3 |
Inventories, gross | 1,130.1 | 1,098.3 |
Less: inventory reserves | 107.9 | 88.6 |
Total Inventories | $ 1,022.2 | $ 1,009.7 |
Inventories - Additional Information (Detail) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2015
USD ($)
| |
Inventory Disclosure [Abstract] | |
Inventory, finished goods | $ 46.1 |
Investments and Other Assets - Marketable Securities, Other Investments and Other Assets (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Marketable securities: | ||
Total marketable securities | $ 13.0 | $ 9.3 |
Investments and other assets: | ||
Legacy Allergan deferred executive compensation investments | 107.6 | 118.1 |
Equity method investments | 15.4 | 17.3 |
Cost method investments | 16.7 | 16.7 |
Other long-term investments | 67.3 | 78.2 |
Taxes receivable | 49.7 | 39.6 |
Other assets | 148.8 | 148.0 |
Total investments and other assets | 405.5 | 417.9 |
U.S. Treasury and Agency Securities - Maturing Within One Year [Member] | ||
Marketable securities: | ||
U.S. Treasury and agency securities | $ 13.0 | $ 9.3 |
Accounts Payable and Accrued Expenses - Summary of Accounts Payable and Accrued Expenses (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
Mar. 31, 2015 |
---|---|---|---|
Accrued expenses: | |||
Accrued third-party rebates | $ 1,502.7 | $ 1,281.6 | |
Accrued payroll and related benefits | 376.9 | 409.7 | |
Current portion of contingent consideration obligations | 306.1 | 79.9 | |
Accrued returns | 298.0 | 288.4 | |
Accrued R&D expenditures | 272.5 | 384.1 | |
Litigation-related reserves and legal fees | 262.7 | 213.5 | |
Accrued pharmaceutical fees | 209.0 | 162.2 | |
Interest payable | 197.7 | 312.0 | |
Royalties payable | 109.9 | 126.9 | |
Accrued non-provision taxes | 102.8 | 100.3 | |
Accrued selling and marketing expenditures | 98.3 | 127.2 | |
Accrued severance, retention and other shutdown costs | 80.8 | 110.4 | |
Dividends payable | 24.1 | 23.9 | $ 23.4 |
Other accrued expenses | 409.6 | 360.0 | |
Total accrued expenses | 4,251.1 | 3,980.1 | |
Accounts payable | 450.0 | 369.4 | |
Total accounts payable and accrued expenses | $ 4,701.1 | $ 4,349.5 |
Goodwill, Product Rights and Other Intangible Assets - Schedule of Goodwill (Detail) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2016
USD ($)
| |
Goodwill [Line Items] | |
Balance as of December 31, 2015 | $ 46,551.5 |
Foreign exchange and other adjustments | 172.5 |
Balance as of March 31, 2016 | 46,724.0 |
US Brands [Member] | |
Goodwill [Line Items] | |
Balance as of December 31, 2015 | 36,107.5 |
Foreign exchange and other adjustments | (26.6) |
Balance as of March 31, 2016 | 36,080.9 |
US Medical Aesthetics [Member] | |
Goodwill [Line Items] | |
Balance as of December 31, 2015 | 4,006.7 |
Balance as of March 31, 2016 | 4,006.7 |
International Brands [Member] | |
Goodwill [Line Items] | |
Balance as of December 31, 2015 | 6,351.0 |
Foreign exchange and other adjustments | 199.1 |
Balance as of March 31, 2016 | 6,550.1 |
Anda Distribution Segment [Member] | |
Goodwill [Line Items] | |
Balance as of December 31, 2015 | 86.3 |
Balance as of March 31, 2016 | $ 86.3 |
Goodwill, Product Rights and Other Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Gross balance of goodwill | $ 46,741.3 | $ 46,568.8 |
Goodwill in discontinued operations | $ 6,092.7 | $ 6,009.7 |
Goodwill, Product Rights and Other Intangible Assets - Schedule of Annual Amortization Expense on Product Rights and Other Related Intangibles (Detail) - Product Rights and Other Related Intangibles [Member] $ in Millions |
Mar. 31, 2016
USD ($)
|
---|---|
Finite Lived Intangible Assets [Line Items] | |
2016 remaining | $ 4,801.8 |
2017 | 6,409.8 |
2018 | 5,934.2 |
2019 | 5,857.4 |
2020 | 5,606.2 |
2021 | $ 4,737.5 |
Long-Term Debt and Capital Leases - Floating Rate Notes - Additional Information (Detail) - Floating Rate Notes [Member] |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Debt Instrument [Line Items] | |
Debt instrument variable rate basis | Three-month LIBOR |
Interest payment terms | Interest on the 2016 Floating Rate Notes is payable quarterly on March 1, June 1, September 1 and December 1 of each year, and began on June 1, 2015. Interest on the 2018 Floating Rate Notes and the 2020 Floating Rate Notes is payable quarterly on March 12, June 12, September 12 and December 12 of each year, and began on June 12, 2015. |
Notes Due September 1, 2016 [Member] | |
Debt Instrument [Line Items] | |
Percentage of margin | 0.875% |
Notes Due March 12, 2018 [Member] | |
Debt Instrument [Line Items] | |
Percentage of margin | 1.08% |
Notes Due March 12, 2020 [Member] | |
Debt Instrument [Line Items] | |
Percentage of margin | 1.255% |
Long-Term Debt and Capital Leases - Cash Bridge Loan Facility - Additional Information (Detail) - USD ($) |
Apr. 09, 2015 |
Mar. 11, 2015 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Mar. 17, 2015 |
---|---|---|---|---|---|
Debt Instrument [Line Items] | |||||
Borrowings outstanding | $ 900,000,000 | $ 200,000,000 | |||
Cash Bridge Loan Facility [Member] | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 2,800,000,000 | ||||
Borrowings outstanding | $ 2,800,000,000 | ||||
Facility repayment | $ 2,800,000,000 | ||||
Cash Bridge Loan Facility [Member] | Base Rate [Member] | Minimum [Member] | |||||
Debt Instrument [Line Items] | |||||
Percentage of margin | 0.00% | ||||
Cash Bridge Loan Facility [Member] | Base Rate [Member] | Maximum [Member] | |||||
Debt Instrument [Line Items] | |||||
Percentage of margin | 1.00% | ||||
Cash Bridge Loan Facility [Member] | Eurodollar [Member] | Minimum [Member] | |||||
Debt Instrument [Line Items] | |||||
Percentage of margin | 1.00% | ||||
Cash Bridge Loan Facility [Member] | Eurodollar [Member] | Maximum [Member] | |||||
Debt Instrument [Line Items] | |||||
Percentage of margin | 2.00% |
Long-Term Debt and Capital Leases - Schedule of Annual Debt Maturities (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Disclosure [Abstract] | ||
2016 remaining | $ 1,905.7 | |
2017 | 3,522.3 | |
2018 | 7,129.7 | |
2019 | 3,325.0 | |
2020 | 6,093.8 | |
2021 | 1,950.0 | |
2022 and after | 17,729.9 | |
Long Term Debt, Gross | 41,656.4 | |
Capital leases | 3.2 | |
Revolving credit facility | 900.0 | $ 200.0 |
Debt issuance costs | (185.6) | |
Other short-term borrowings | 93.0 | |
Unamortized premium | 205.1 | 225.9 |
Unamortized discount | (104.6) | (107.4) |
Total Indebtedness | $ 42,567.5 | $ 42,530.4 |
Other Long-Term Liabilities - Summary of Other Long-Term Liabilities (Detail) - USD ($) $ in Millions |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Acquisition related contingent consideration liabilities | $ 559.5 | $ 788.1 |
Long-term pension and post retirement liability | 224.7 | 222.1 |
Legacy Allergan deferred executive compensation | 106.9 | 117.9 |
Long-term severance and restructuring liabilities | 35.9 | 34.9 |
Product warranties | 28.0 | 28.4 |
Long-term contractual obligations | 25.6 | 26.4 |
Deferred revenue | 13.3 | 18.2 |
Other long-term liabilities | 30.1 | 26.0 |
Total other long-term liabilities | $ 1,024.0 | $ 1,262.0 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Company's effective tax rate | 83.20% | 24.80% |
Income tax expense due to change in valuation allowance | $ 124.3 | |
Tax benefit of recognition of unrecognized tax benefits | 32.2 | |
Out of period tax benefit recorded related to prior year | $ 20.0 |
Shareholders' Equity - Summary of Changes in Shareholders' Equity (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Shareholders Equity [Line Items] | ||
Shareholders' equity, Beginning Balance | $ 76,591.4 | |
Net income attributable to members | 255.7 | $ (512.0) |
Increase in additional paid in capital for share-based compensation plans | 99.0 | |
Net income attributable to ordinary shareholders | 186.1 | (535.2) |
Proceeds from stock plans | 69.6 | 42.6 |
Excess tax benefit from employee stock plans | 34.6 | |
Repurchase of ordinary shares | (53.2) | |
Other comprehensive income | 522.5 | (317.9) |
Shareholders' equity, Ending Balance | 77,450.0 | |
Warner Chilcott Limited [Member] | ||
Shareholders Equity [Line Items] | ||
Members' equity, Beginning Balance | 75,573.7 | |
Net income attributable to members | 270.9 | (508.4) |
Dividend to Parent | (69.6) | |
Other comprehensive income | 522.5 | $ (317.9) |
Members' equity, Ending Balance | $ 76,297.5 |
Derivative Instruments and Hedging Activities - Additional Information (Detail) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Derivative Instruments And Hedging Activities Disclosures [Line Items] | |||
Losses recognized on foreign currency forward contracts | $ 14,700,000 | $ 12,800,000 | |
Foreign Exchange Option Contracts [Member] | Prepaid Expenses and Other Current Assets [Member] | |||
Derivative Instruments And Hedging Activities Disclosures [Line Items] | |||
Foreign currency derivative assets | 16,900,000 | $ 25,000,000 | |
Foreign Exchange Option Contracts [Member] | Investments and Other Assets [Member] | |||
Derivative Instruments And Hedging Activities Disclosures [Line Items] | |||
Foreign currency derivative assets | 42,000,000 | 48,500,000 | |
Foreign Exchange Option Contracts [Member] | Within Accounts Payable and Accrued Expenses [Member] | |||
Derivative Instruments And Hedging Activities Disclosures [Line Items] | |||
Foreign currency derivative liabilities | $ 0 | $ 0 |
Fair Value Measurement - Change in Fair Value of Contingent Consideration Obligations (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Change in fair value of contingent consideration obligation | $ 33.6 | $ 28.8 |
Cost of Sales [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Change in fair value of contingent consideration obligation | 7.8 | 27.7 |
Research and Development Expense [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Change in fair value of contingent consideration obligation | 25.9 | |
General and Administrative Expense [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Change in fair value of contingent consideration obligation | $ (0.1) | $ 1.1 |
Fair Value Measurement - Summary of Changes in Fair Value of all Financial Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Beginning balance | $ 868.0 | |
Contingent obligations, ending balance | 865.6 | |
Contingent Consideration Obligations [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Beginning balance | 868.0 | $ 373.8 |
Purchases and settlements, net | (35.1) | 346.8 |
Net accretion and fair value adjustments | 33.6 | 28.8 |
Foreign currency translation | (0.9) | 0.2 |
Contingent obligations, ending balance | $ 865.6 | $ 749.6 |
Business Restructuring Charges - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Restructuring And Related Activities [Abstract] | ||
Restructuring charges recognized | $ 16.1 | $ 509.6 |
Subsequent Events - Additional Information (Detail) - Subsequent Event [Member] - USD ($) |
Apr. 21, 2016 |
Apr. 06, 2016 |
---|---|---|
Heptares Therapeutics [Member] | ||
Subsequent Event [Line Items] | ||
Payment for license upfront fees | $ 125,000,000 | |
Heptares Therapeutics [Member] | Maximum [Member] | ||
Subsequent Event [Line Items] | ||
Contingent milestone payments | 665,000,000 | |
Aggregate payments contingent upon achieving certain annual sales threshold milestones | 2,575,000,000 | |
Pfizer Inc [Member] | ||
Subsequent Event [Line Items] | ||
Reimbursable expense | $ 150,000,000 | |
Topokine Therapeutics [Member] | ||
Subsequent Event [Line Items] | ||
Payment for license upfront fees | $ 85,000,000 | |
Topokine Therapeutics [Member] | Maximum [Member] | ||
Subsequent Event [Line Items] | ||
Contingent payments based on commercial and development milestones | $ 260,000,000 |
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